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THE  LIBRARY 

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THE  UNIVERSITY 

OF  CALIFORNIA 

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PRATTS'  DIGEST, 


COMPKISINO  THB 


Laws  Relating  to  National  Banks, 


With  Annotations,  References  to  Decisions 
OP  the  Courts,  and  Table  of  Cases  Cited, 


AI.SO 


information  in  regard  to  the  organization  and  con- 
duct OF  NATIONAL  BANKS,  FORMS  AND  INSTRUCTIONS  OF 
THE  OFFICE  OF  COMPTROLLER  OF  THE  CURRENCY^ 
AND    MISCELLANEOUS    REGULATIONS    OF    THE 
UNITED  STATES  TREASURY  DEPARTMENT 
OF    IMPORTANCE    TO    BANKERS. 


Edition  of  1901. 

Revised, 


PRBPARSD  AND  PUBUSHBD  BY 

a.  s.  pratt  &  sons, 
National  Bank  Agents, 

WASHINGTON,  D.  C. 


Bntered  according  to  Act  of  Congress,  in  the  year  1898^  by 

A.  S.  Pratt  &  Sons, 

In  the  Office  of  the  I<ibrarian  of  Congress   at  Washington,  D.  C. 


PRKFACE. 


The  National  Banking  System  of  the  United  States,  established 
by  Act  of  Congress,  approved  June  3d,  1864,  and  known  as  the 
National  Bank  Act,  has  passed  its  experimental  stage  and  in  its 
principal  features  has  become  interwoven  with  the  national  life. 

This  work  was  originally  simply  a  Digest  of  the  National  Bank 
Act,  but  in  the  development  of  the  National  System  of  Banking 
the  form  of  the  work  was  changed,  giving  the  Act  in  full  with 
amendments  and  additions,  and  under  each  section,  the  decisions 
of  the  Courts,  determining  the  intent  of  the  law.  The  notes 
include  a  statement  of  all  the  points  of  law  decided  in  National 
Bank  cases  except  such  as  have  been  overruled  by  the  Supreme 
Court  of  the  United  States.  There  is  also  given  the  general 
bearing  of  the  decisions  on  questions  arising  in  the  daily  business 
of  banking,  rulings  of  the  Comptroller  of  the  Currency  made 
from  time  to  time,  and  a  reasonable  construction  of  the  National 
Bank  Act  on  points  not  settled  by  Courts  of  final  resort,  and  on 
others  not  as  yet  tested  in  the  Courts. 

The  Digest  further  treats  very  fully  the  subject  of  the  organiza- 
tion and  management  of  National  Banks,  the  relation  of  the 
banks  to  the  Office  of  Comptroller  of  the  Currency,  and  other 
departments  of  the  U.  S.  Treasury. 

Very  careful  attention  has  been  given  to  make  the  index  com- 
plete and  also  the  table  of  cases  cited. 

The  legal  portion  of  this  edition,  and  of  the  work  for  several 
years  past  has  been  prepared  by  John  J.  Crawford,  Esq.,  of  the 
New  York  Bar,  so  well  known  to  the  lawyers  and  bankers  of  the 
country  as  the  draftsman  of  the  Negotiable  Instrument  Law  and 
as  a  leading  authority  on  commercial  and  banking  law. 

762574 


CONTENTS. 

A  Full  Index  is  given  at  end  of  the  work. 


PART    I. 


THE  LAWS  RELATING  TO  NATIONAL  BANKS,  WITH  ANNOTATIONS. 

CHAPTER  PAOB 

I.    The  Comptroller  of  the  Currency i 

II.     Organization  and  Powers  of  National  Banks 5 

III.  Obtaining  and  Issuing  Circulating  Notes 66 

IV.  Regulations  of  the  Banking  Business 79 

V.     Dissolution  and  Receivership 118 

VI.  Tax  on  Unauthorized  Circulation 143 

VII.  Crimes  and  Misdemeanors 146 

VIII.  Suits,  Jurisdiction,  and  Evidence 159 

IX.  Amendments  and  Additional  Acts         165 

PART   II. 

The  Organization  and  Management  of  National  Banks ;  Extend- 
ing Corporate  Existence  ;  Placing  in  Voluntary  Liquidation  ; 
and  Designation  as  Government  Depositaries. 

I.     Organization  of  Banks  de  novo. 

The  Subscription  Paper — Notice  to  Comptroller — Corpora- 
tors— Articles  of  Association — Organization   Certificate — 
Sundry  Requirements  to  Complete  Organization  and  Forms.    195 
Conversion  of  State  Bank  into  a  National  Bank. 

Procedure— Consent  of  Shareholders — Certificate  of  Officers 

and  Directors,  etc.,  with  Forms 211 

A  General  Form  of  By-Laws 216 

Suggestions  as  to  the  Management  of  National  Banks 221 

V 


vi  Contents. 

CHAPTBR  rA.OB 

II.     Placing  National  Banks  in  Voluntary  Liquidation  and  Forms    .   .    226 

III.  Extension  of  Corporate  Existence,  and  Liquidating  on  Expira- 

tion of  Charter,  and  Forms 229 

IV.  Designation  and  Regulation  of  National  Banks  as  Depositaries  of 

Public  Moneys 236 

PART    III. 

Reports  to  the  Comptroller  of  the  Currency  ;  Lawful  Money 
Reserve  ;  Miscellaneous  Forms  ;  The  Five-PerCent.  Redemp- 
tion Fund  ;  The  Redemption  and  Re-issue  of  Circulating  Notes. 

I.     Report  of  Condition  of  Bank ;   Forms  Used ;    Explanation  of 

Items  and  Instructions 244 

Report  of  Earnings  and  Dividends,  Forms  Used,  Explanation  of 
Items  and  Instructions 253 

II.     Lawful   Money  Reserve,   Regulations,   Rules  for  Computation, 

Short  Methods,  Forms,  and  Examples 257 

Miscellaneous  Forms  for  Certifying  the  Comptroller  of  the  Cur- 
rency in  Regard  to  Payment  on  Capital  Stock,  its  Increase  and 
Reduction,  and  other  Forms 271 

III.  The  Five-Per-Cent.  Redemption  Fund  ;  The  Transportation,  Re- 

demption and  Re-issue  of  Currency 275 

IV.  Tax  on  Circulating  Notes 279 

PART   IV. 

The  Issue  and  Redemption  of  U.  S.  Coin  and  Paper  Currency 
and  Transportation ;  Miscellaneous  Regulations  as  to  U.  S. 
Bonds  and  Treasury  Drafts;  also  the  Portions  of  the  War 
Revenue  Law  Pertaining  to  Banks. 

I.    The  Issue,  Redemption  and  Exchange  of  U.  S.  Coin  and  Paper 

Currency,  Transportation  Charges,  Etc 281 

II.     Miscellaneous  Regulations  ;  U.  S.  Bonds,  Coupon  and  Registered, 
Exchange,  Assignment,  Interest ;    Indorsement    of  Treasury 

Drafts,  etc 287 

War  Revenue  Law  Pertaining  to  Banks  and  Bankers 300 

Supplement  to  Edition  of  1898,  Court  Decisioas,  etc 303 


TABLE  OF  CASES 


A 

VAOK 

Adams  v.  Nashville,  95  U.  S.,  19 109 

"        V.  Spokane  Drug  Co.,  57  Fed.  Rep.,  888 141 

Adair  z/.  Robinson,  6  Tex.  Cir.  App.,  275 iii 

Agnew  t/.  U.  S.,  167  United  States,  36 148,  149 

Albion  Bank  z^.  Montgomery,  74  N.  W.  Rep.,  1 102 85,90,92 

Albuquerque  N.  Bk.  v.  Perea,  147  U.  S.,  87 114 

Allen  V.  The  First  N.  Bk.  of  Xenia,  23  Ohio  St.,  97 95 

Anderson  v.  First  N.  Bk.  Grand  Forks,  67  N.  W.  Rep.,  821 19 

"         V.  Line,  14  Fed.  Rep.,  405 49 

"         V.  Philadelphia  Warehouse  Co.,  iii  U.  S.,  479 53 

Armstrong  v.  Chemical  N.  Bk.,  41  Fed.  Rep.,  234 139 

"           V.  Chemical  N.  Bk.,  83  Fed.  Rep.,  556 14 

V.  Ettlesohn,  36  Fed.  Rep.,  209 160 

Receiver  v.  Warner,  49  Ohio  St.,  376 141 

z/.  Second  N.  Bk.,  38  Fed.  Rep.,  883 79 

V.  Troutman,  36  Fed.  Rep.,  275 160 

Aspinwall  v.  Butler,  133  U.  S.,  595 33.  34.  164 

Atlantic  N.  Bk.  v.  Harris,  118  Mass.,  147 64 

"        State  Bank  v.  Savery,  82  N.  Y.,  291 11 

Auburn  Savings  Bank  v.  Hayes,  61  Fed.  Rep.,  911 131,  142 

B 


« 
« 
<< 


Bailey  v.  Mosher,  63  Fed.  Rep.,  488 137 

"      f.  Sawyer,  4  Dill.,  463;  iN.  B.C.,  356 58 

Baker  z/.  Alt,  78  Fed.  Rep.,  374 , 163 

"      V.  Reeves,  85  Fed.  Rep.,  837,836 56,60 

Baldwin  v.  State  N.  Bk.,  26  Minn.,  43 21 

Bank  z/.  Kennedy,  17  Wall. ,  19 129,  130 

"    V.  Lanier,  11  Wall.,  369 96 

V.  Matthews,  98  U.  S.,  621 20 

V.  Mclntyre,  40  Ohio  St.,  528 64 

of  Bethel  z/.  Pahquioque  Bank,  14  Wall.,  383 128,130,  133 

"     of  Cadiz  I/.  Slemans,  34  Ohio  St.,  142 92 

"    of  Redemption  v.  Boston,  125  U.  S.,  60 106,  108 

Bamet  v.  Muncie  N.  Bk.,  98  U.  S.,  855      86,  90 

Batchelor  t/.  United  States,  156  U.S.,  426 153 

vii 


« 
(I 
« 


via 


Bath  Saving  Institution  t'.  Sagadehock  N.  6k.,  89  Maine,  500 119 

Beall  V.  Essex  Savings  Bank,  67  Fed.  Rep.,  816 54 

Beckham  v.  Shackelford,  8  Tex.  Cir.  App.,  660 141 

Bell  V.  Hanover  N.  Bk.,  57  Fed.  Rep.,  821 .    139 

Bethel  v.  Pahquioque  Bank,  10  Wall.,  383 133 

Birmingham  N.  Bk.  z/.  Mayer,  104  Alabama,  634 119 

Blair  v.  First  N.  Bk.  of  Mansfield,  10  Chicago  Legal  News,  84  ;  2  N. 

Bk.  Cas.,  173 16 

Bletz  f.  Columbia  N.  Bk.,  87  Penn.  St.,  87 91,161 

Bobs  V.  People's  N.  Bk.,  21  Fed.  Rep.,  888 89 

Boone  County  N.  Bk.  v.  Latimer,  67  Fed.  Rep.,  27 140 

Bowdell  V.  Farmers'  and  Merchants'  N.  Bk.,  14  Bankers'  Magazine, 

378  ;  2  N.  Bk.  Cases,  146      53 

Bowdell  V.  Farmers'  and  Merchants'  N.  Bk.,  Brown's  N.  Bk.  Cases,  147      26 

Bowden  z/.  Johnson,  107  U.  S.,  251 55ii3o 

Boyer  v.  Boyer,  113U.  S.,  690  T.,  143 109,  114 

BoynoU  v.  State,  25  Wis.,  112 iii 

Bradley  v.  The  People,  4  Wall.,  459 in 

Briggs  V.  Spalding,  141  U.  S.  132 42,  43 

Brinkerhoff  z/.  Bostwick,  88  N.  Y.,  52 132,137,161 

Brittan  v.  Evansville  N.  Bk.,  105  U.  S.,  322 no 

Brown  z/.  Farmers' and  Merchants' N.  Bk.,  88  Tex.,  265 47 

"      V.  Finn,  142  U.  S.,  56 51 

V.  French,  80  Fed.  Rep.,  166 114 

z/.  Marine  N.  Bk.,  18  Sup.  Ct.,  390 88,92 

Bullard  v.  N.  Bk.,  18  Wall.,  589 96 

Bundy  z*.  Cocke,  128  U.  S.,  185 49 

"      V.  Jackson,  24  Fed.  Rep.,  1628 97 

Bumham  v.  First  N.  Bk.,  53  Fed  Rep.,  163 189 

Burrows  f.  Neblack,  84  Fed.  Rep.,  in 97 

"        V.  Smith,  Treas.,  29  S.  E.  Rep.,  674 in 

Bushnell  v.  Chatauqua  County  N.  Bk.,|74  N.  Y.,  290 8 

Butler  r/.  Eaton,  141  U.S.,  240 26 

"      f.  Poole,  44  Fed.  Rep.,  586 129,131,  161 

c 

Cadle  z;.  Baker,  20  Wall.,  650 128 

"      V.  Tracey,  11  Blatch,  loi 160 

California  N.  Bk.  v.  Kennedy,  167  U.  S.,  362 9,  19 

Case  V.  Citizens'  Bank,  loo  U.  S.,  446 27 

V.  Citizens'  Bank  of  Louisiana,  2  Woods,  23 138 

V.  Small,  10  Fed.  Rep.,  722 129 

"    V.  Terrill,  n  Wall.,  199 i 

Casey  v.  Adams,  102  U.  S.  96 160 

"      z'.  Galli,  94  U.  S.,  673 48,57,58,63,164 

"      V.  La  Society  de  Credit  Mobilier  de  Paris,  2  Woods,  77    ...   7,  139 

Caitles  I/.  City  of  New  Orleans,  46  La.  Ann.,  542 114 


II 


II 


IX 

VAOB 

Catch  V.  Fitch,  34  Fed.  Rep.,  566 57 

Central  N.  Bk.  v.  Pratt,  115  Mass.,  539 90 

Charleston  z/.  People's  N.  Bk.,  5  S.  C,  103 1.33,106 

Chattahoochee  N.  Bk.  v.  Schley,  58  Ga.,  360 8 

Chemical  N.  Bk.  v.  Armstrong,  59  Fed.  Rep.,  372 134 

"  "       7^.  Armstrong,  65  Fed.  Rep.,  573 14 

"  "       V.  Bailey,  12  Blatckford,  480 134 

"  "       Chicago  z/.  World's  Col.  Expsn.,  170  111.,  82 135 

"  "       V.  Hartford  Deposit  Co.,  156  111.,  522 128,  130 

"  "       z/.  Hartford  Deposit  Co.,  161  U.S.,  I 128 

Church  V.  Ayer,  80  Fed.  Rep.,  543 60 

Citizens'  Bank  of  Louisiana  v.  Board  of  Assessors,  52  Fed.  Rep.,  73  .    .    106 

"         N.  Bk.  V.  Dowd,  35  Fed.  Rep.,  340 140 

N.  Bk.  of  Kingman  v.  Berry,  53  Kan.,  696 16,  46 

City  N.  Bk.  z/.  Phelps, 97  N.  Y.,  44 64 

City  of  Boston  v.  Beall,  55  Fed.  Rep.,  26  S.  C;  51  Fed.  Rep.,  300  .    112,  114 

City  of  Carthage  v.  First  N-  Bk.,  71  Mo.,  508 113 

City  of  Richmond  v.  Scott,  48  Ind.,  568 112 

Cleveland,  Brown  &  Co.  £».  Shoeman,  40  Ohio  St.,  176 9 

Clews  V.  Barden,  36  Fed.  Rep.,  617 44 

Cochran  v.  United  States,  157  U.  S.,  286 150,  151,  154 

CoflFey  v.  N.  Bk.  of  Missouri,  46  Mo.,  140 8,64 

Coffin  V.  United  States,  162  U.  S.,  664 148,  151,  153 

Commercial  N.  Bk.  v.  Pirie,  27  CCA,  171  ;  82  Fed.  Rep.,  799  ....      13 
Commissioners  of  Rice   Co.   v.   Citizens'    N.    Bk.   of    Fairibault,    23 

Minn.,  280 109 

Commonwealth  v.  Barry,  116  Mass.,  i 152 

''  V.  Feltan,  loi  Mass.,  204 151,  161 

"  V.  Ketner,  92  Pa.  St.,  372 151,  161 

"  V.  Manf.  &  Mechs'.  Bk.  of  Phila.,  2  Pearson's  Decisions, 

386  ;  2  N.  Bk,  Cases,  456 112 

Commonwealth  y.  Tenny,  97  Mass.,  50 152 

Conklin  z/.  The  Second  N.  Bk. ,  45  N.  Y.,  655 96 

Cook  County  N.  Bk.  v.  United  States,  107  U.  S.,  445 134,  141 

Corcoran  v.  Batchelder,  147  Mass.,  541 95 

Corn  Exchange  Bank  v.  Blye,  loi  N.  Y.,  303 141 

Cornell's  Executors  v.  First  N.  Bk.,  of  Kansas  City,  32  U.  S.  App.,  426     33 
County  Commrs.  v.  Farmers'  and  Mechs'.  N.  Bk.,  48Md.,  117    ....    109 

Cox  V.  Elmendorf,  97  Tenn.,  518 50 

"    V.  Beck,  83  Fed.  Rep.,  269 86 

"    f.  Montague,  78  Fed.  Rep.  837       . 56 

"    V.  Robinson,  70  Fed.  Rep.,  760 14 

Cragie  v.  Hadley,  99  N.  Y.,  131 140 

Crocker  z/.  First  N.  Bk.,  Thompson's  N.  Bk.  Cases,  317 89 

"        z/.  Whitney,  71  N.  Y,  161 20 

Cross  f.  State  of  North  Carolina,  132  U.  S.,  131 150,  152 

Cummings  v.  N.  Bk..  loi  U.  S.,  153 114 


D 

Danforth  v.  Nat'l  State  Bank,  48  Fed.  Rep.,  271 85 

Davis  V.  Cook,  9  Mo..  134 161 

"      z/.  Essex  Baptist  Society  U.  S.  D.  C,  44  Conn.,  569 6i 

"      V.  Knipp,  92  Hun.,  297 141 

"      V.  Randall,  115  Mass.,  547 90 

"      V.  Stevens,  17  Blatchford,  259 55 

\   *'      V.  The  Elmira  Savings  Bank,  U-  S.  Sup.  Ct.,  161  U.  S.,  275  ;  Re- 
versing S.  C,  142  N.  Y.,  590 142 

' '      V.  Weed,  44  Conn.,  569 48 

Delano  y.  Butler,  118  U.  S.,  634 33 

Delaware,  Lacka.  &  Western  R.  R.  Co.   v.  Oxford  Iron  Co.,  38  N.  J., 

Eq.,  340 96 

Denton  v.  Baker,  24  C.  C.  A.,  476;  79  Fed.  Rep.,  189 135 

Deposit  Bank  of  Owensboro  z/.  Daviess  Co.,  39  S.  W.  Rep.,  1030  ....  112 

Doty  V.  First  N.  Bk.  of  Larimore,  3  N.  D.,  9 24,  25 

Dow  z'.  United  States,  82  Fed.  Rep.,  904 148,  150 

Dresser  z/.  Traders'  N.  Bk.,  165  Mass.-  120 15 

Driesbach  v.  N.  Bk.,  104  U.  S. ,  52 87 

Duncan  v.  First  N.  Bk.  of  Mt.  Pleasant,  11  Bankers'  Magazine,  787  .    .  84 

£ 

Eans  V.  Exchange  Bank,  79  Mo.,  182 64 

Eaton  V.  Pacific  Bank,  144  Mass.,  260 33 

"      V.  Union  County  N.  Bk.,  141  Ind.,  136 114 

Elder  z/.  First  N.  Bk.  of  Ottawa,  12  Kans.,  238 95 

Ellerbee  v.  Nat'l  Exchange  Bank,  107  Mo.,  445 12 

Ellis  z/.  First  N.  Bk.  of  OIney,  II  Bradw.,  275 86 

"    V.  Little,  27  Kans.,  701 129 

Elwood  V.  First  N.  Bk.,  41  Kans.,  475 118,  119 

Engelke  et  al  z'.  Schlender,  75  Tex.,  559 iii 

Evans  v.  United  States,  153  U.  S.,  608 153 

Evansville  N.  Bk.  v.  Metropolitan  N.  Bk.,  2  Biss.,  527 96 

Exchange  Bank  v.  Peters,  45  Fed.  Rep.,  13 137 

Exeter  N.  Bk.  v.  Orchard,  42  Nebraska,  599 91 

F 

Faber  v.  Hanover  N.  Bk.,  64  Fed.  Rep.,  832 .   ,   .   .  141 

"      V.  Stephens,  35  Fed.  Rep.,  18 141 

Fall's  Appeal,  21  Alb.  L.J.  ;  2  N.  B.  C,  411 27 

Farmers' N.  Bk.  z".  Templeton,  40  S.  W.  Rep.,  412 47 

Farmers'  and  Mchts'.  N.  Bk.  v.  Smith,  40  U.  S.  App.,  690 13,  i7 

Farmers'  and  Mechs'.  Bank  v.  Hoagland,  7  Fed.  Rep.,  159 88 

Farmers'  and  Mechs'.  N.  Bk.  v.  Dearing,  91  U.  S.,  29 90 

Farmers'  and  Traders'  N.  Bk.  v.  Hoffman,  93  Iowa,  119,  191    ...    106,  113 

Finn  v-  Brown,  142  U.  S.,  56 51 


xi 

FAoa 

First  N.  Bk.  v.  Bailey,  15  Mont.,  301 114 

••        ♦*      V.  Brodhecker,  137  Ind.,  693 114 

'*        "      r/.  City  of  Riclimond,  39  Fed  Rep.,  309 no 

"         "      V.  Douglas  Co.,  3d  Dill.,  330 113 

"        "      V.  Forest,  40  Fed.  Rep.,  705 189 

**        "      V,  Garlinghouse,  22  Ohio  St.,  492 190 

"        "      z/.  Grimes  (Kan.),  49  Kans.,  219 87 

*•        •'      V.  Lindsay,  45  Fed.  Rep.,  619 no,  112 

"        "      V.  Morgan,  132  U.  S.,  141 88,188 

••        "      z/.  Nat'l  Exc.  Bk.,92U.  S.,  122 9 

"        "      V.  Peterborough,  56  N.  H.,  38    , 108 

•'         "      z/.  Strong,  138  111.,  347 7 

"        "      Aberdeen  z/.  Chehalis  County,  6  Wash.,  64 106,109 

*•        "     AUentown  v.  Hock,  89  Pa.  St.,  324 9 

'•         "      Centralia  z/.  Marshall,  26  111.  App.,  440 118 

"        "      Charlotte  v.  Morgan,  132  U.  S.,  141 70,160 

'*         *'      Charleston  v.  Nat'l  Exchange  Bank,  92  U.  S.,  122   .    •    .    .      10 

"        "      Concord  z/.  Hawkins,  33  U.  S.  App.,  747 48,57 

"         "      Concordia  v.  Rawley,  52  Kans.,  394 89 

"        "      Decatur  z/.  Johnson,  97  Ala.,  655 139 

*'        "     Dorchester  z'.  Smith,  39  Neb.,  90 89 

"        "      Leoti  z/.  Fisher,  45  Kans.,  726 106,110 

"      Lynn  z/.  Ocean  N.  Bk.,  60  N.Y.,  278 8 

''         "      Mead  Center  z/.  Grimes,  49  Kans.,  219 87 

"        "      Mt.  Pleasant,  z/.  Tinstman,  36  Legal  Intelligencer,  228    .   .      84 
'*        "      Parker  v.  Pavey  Elevator  Co.,  S.  D.  72  N.  W.  Rep.,  402    .      17 

"         "      Fierrev.  Smith,  52  Bankers'  Magazine,  171 I2 

"        "      Richmond  z/.  City  of  Richmond.,  39  Fed.  Rep.,  389  .    .    .    .    no 

"        "      Rochester  v.  Harris,  108  Mass.,  514 12 

"         "      Rochester  v.  Pierson,  24  Minn.,  140 10 

"        "      Skowegan  v.  Maxfield,  83  Me.,  576 20 

"        "      Tecumseh  v.  Overman,  22  Neb.,  116 9I 

"        "      Youngstown  v,  Hughes,  2  N.  Bk.  Cas.,  176 113 

Fisher  z/.  Yoder,  53  Fed.  Rep.,  565 131,  160,  189 

Flanagan  et  al  zk  California  N.  Bk.,  56  Fed.  Rep.,  959 15.  16 

Florence  R.  R.  and  Improvement  Co.  v.  Chace  N.  Bk.,  106  Ala.,  364    .      90 

Foster  v.  Wilson,  75  Fed.  Rep.,  797 56 

*'      V.  Chase,  75  Fed.  Rep.,  797 56 

Fowler  v.  Scully,  72  Pa.  St.,  451 20 

Frazer  z/.  Seibem,  16  Ohio  St.,  614 in 

Fridley  v-  Bowen,  87  111.,  151 20 

Freeman  Manuf.  Co.  v.  N.  Bk.  of  the  Republic,  160  Mass.,  398       ...    162 


Garner  z/.  Second  N.  Bk.,  66  Fed.  Rep.,  369      162 

Gay  V.  Dare,  103  Cal.,  454 5a 

Gibson  v.  Peters,  150  U.  S.,  342 132 


ni 

PA08 

Gold  Mining  Co.  v.  Rocky  Mountain  N.  Bk.,  96  U.  S.,  640 95 

Graves  v.  The  Lebanon  N.  Bk.,  10  Bush.,  23 17 

"       f.  United  States,  165U.  S.,  323 150 

Grow  V.  Cockrell,  63  Ark.,  418 17 

Gruber  v.  First  N.  Bk.,  87  Penn.  St.,  468 84 

Guernsey  v.  Black  Diamond  Coal  &  M.  Co.,  99  Iowa,  471 46 

Guild  z/.  First  N.  Bk.  of  Deadwood,  4  S.  D.,  566 85,88 

H 

Hade  z*.  McVey,  31  Ohio  SL,  231 161 

Hager  v.  Union  N.  Bk.,  63  Me.,  509 96 

Haire  z'.  First  N.  Bk.,36  Iowa    .   .   .' 22 

Hale  V.  Walker,  31  Iowa,  344 53 

Hall  V.  First  N.  Bk.  of  Fairfield,  30  Neb.,  94,  99 85,  88 

Hanson  z>.  Heard,  38  Atl.  Rep.,  788 17,  86 

Harrington    v.    First    N.     Bk.    Chittenango,    i   Thompson  &    Cook, 

(N.  Y.),36i 16 

Hayden  v.  Bank  of  Syracuse,  59  Hun.,  620 64 

"        v.  Chemical  N.  Bk.,  80  Fed.  Rep.,  587 139 

"        V.  Thompson,  36  U.  S.  App.,  361 93 

Hayes  v.  Shoemaker,  39  Fed.  Rep.,  319 25,  50,  57 

Hays  V.  Beardsley,  136  N.  Y.,  299 138 

Hazard  v.  Nat'l  Exchange  Bank  of  Newport,  26  Fed.  Rep.,  94    ...    .      27 
Hendee  v.  Connecticut,  etc.,  R.  R.  Co.,  26  Fed.  Rep.,  677    ....   160,  189 

Henderson  N.  Bk.  v.  Alves  (Ky.),  15  S.  W.  Rep.,  132 88,  89 

"  "       z/.  Alves,9i  Ky.,  142 87,88,91,161 

Hennessy  v.  City  of  St.  Paul,  54  Minn.,  219 18 

Hepburn  v.  School  Directors,  23  Wall ,  480 109 

Hershire  z^.  First  N.  Bk.,  35  Iowa,  272 113 

Hill  V.  N.  Bk.  of  Barre,  15  Fed.  Rep.,  432 88 

Hills  z/.  Exchange  Bank,  105  U.S.,  319 114 

Hinds  V.  Marmelejo,  60  Cal.,  229 84 

Hintermister  v.  First  N.  Bk.,  64  N.  Y.,  212 89,  90 

Hirsh  z^.  Jones,  56  Fed.  Rep.,  137 138 

Hiscock  V  Lacy,  N.  Y.,  9  Misc.,  578 93 

Hobert,  Receiver,  etc.  v,  Gould,  8  Fed.  Rep.,  57 59 

Hobbs  V.  Western  N.  Bk.,  U.  S.  Ct.  Ct.,  2  N.  Bk.  Cas.,  187 24 

Hodgson  V.  McKinstry,  3  Kans.  App.,  412 119 

Holmes  v.  Boyd,  90  Ind.,  322 21 

Hoover  v.  Weiss  Malting  and  Elevator  Co.,  56  Fed.  Rep.,  356 162 

Home  V.  Greene,  52  Miss.,  452 113 

Hot  Springs  Indpnt.  School  District,  etc  v.  First  N.  Bk.  H.  Spr.,  61  Fed. 

Rep.,  417 13I'  189 

Howard  N.  Bk.  v.  Loomis,  51  Vt.,  349 21 

Howe  V.  Barney,  45  Fed.  Rep.,  688 137 

Huggin  V.  Citizens'  N.  Bk.  ,6  Tex.  Cir.  App.,  33 86 

Hughitt  V.  Hayes,  136  N.  Y.,  163 141 


XIU 

Hunt,  Appellant,  etc.,  141  Mass.,  515 76 

Hutchinson  f.  Crutcher,  98  Tenn.,  421 128 


Indiana  Board  of  Commissioners  v.  Elston,  32  Ind.,  37 113 

In  re  Armstrong,  41  Fed.  Rep.,  381 139 

"     Beard's  Est.,  50  Pacific  Rep.,  226 60 

"     Braden's  Est.,  165  Pa.  St.,  184 24 

"     Certain  Stockholders  of  the  California  N.  Bk.  San  Diego,  53  Fed. 

Rep.,  38 129 

"     Eno,  54Fed.  Rep.,  669 152,  161 

"    Herman,  50  Fed.  Rep.,  517 132 

"    Manufacturers' N.  Bk.,  5  Bissell,  499 128 

"     N.  Bk.  of  St.  Albans,  49  Fed.  Rep.  120 49 

"    Third  N.  Bk.,  9  Bissell,  535  ;  4  Fed.  Rep.,  775 129 

"     Van  Campen,  2  Benedict,  419 148,149 

"    Wild,  II  Blatchford,  243 84 

Interstate  N.  Bk.  z/.  Ferguson,  48  Kans.,  732 7 

Irons  z/.  Manufacturers' N.  Bk.,  6   Biss.,  301 119,127 

"     z/.  Manufacturers' N.  Bk.  et  al.,  17  Fed.  Rep.,  308 56 


Jackson  v.  United  States,  20  Ct.  Cls.,  298 135 

Johnson  z/.        "          "      3  Hughes,  657  .   .   .   .   , 12 

V.  Laflin,  5  Dill., 65 26 

V.       "       103U.  S,  800 25,26 

"       V.  N.  Bk.  Gloversville,  74  N.  Y.,  329 84 

Johnston  v.  United  States,  17  Ct.  Cls.  Rep 176 

Jones  y.  Rushville  N.  Bk.,  138  Ind.,  87 114 

K 

Kelsey  f.  N.  Bk.  of  Crawford,  69  Pa.  St.,  426 64 

Kennedy  v.  California  Savings  Bank,  loi  Cal.,  495 19 

"         V.  Gibson,  8  Wall.,  498,  505 i,  58,  127,  129,  130,  132,  133 

Kerser  v.  Hitz,  133  U.  S.,  138 2 

King  V.  Armstrong,  50  Ohio  St.,  222 59»  '42 


La  Dow  V.  First  N.  Bk.  of  New  London,  Sup.  Ct.  Ohio,  1894 85 

Lang  V.  Burley,  loi  111.,  591 51 

Lake  Erie,  etc.,  R.  R.  Co.  v.  Indianapolis  N.  Bk.,  65  Fed.  Rep.,  690    .    140 

Lanham  v.  First  N.  Bk.  of  Crete,  46  Neb.,  663 91 

Latimer  f.  Bard,  76  Fed.  Rep.,  536 32,52 

Lazear  v.  Nat'l  Union  Bank  of  Baltimore,  52  Md.,  73,  78 89,  90 

Leach  v.  Hale,  31  Iowa,  69 8, 10 


XIV 

Leather  Manufacturers'  N.  Bk.  v.  Cooper,  120  U.  S.,  778 188 

Lewis  V.  Leirtz,  74  Fed.  Rep.,  381 51,  61 

Libby  t/.  Union  N.  Bk.,  99  111,622 21 

Lilly  r.  Board  of  Commissioners,  69  N.  C,  300 1x3 

Linn  County  N.  Bk.  v.  Crawford,  69  Fed.  Rep.,  532 131,  189 

Lionberger  v.  Rouse,  9  Wall.,  486 iii,  112 

Lockwood  z/.  The  American  N.  Bk.,  9  R.  L,  308 65 

Logan  County  N.  Bk.  v.  Townsend,  139  U.  S.,  67,  73 7,  18, 189 

Luberg  z^.  Commonwealth,  94  Pa.  St.,  85 152 

Lucas  V.  Coe,  86  Fed.  Rep.,  972 60 

"      V.  Government  N.  Bk.,  78  Pa.  St.,  228 87 

Lynch  z/.  Bank,  22  West  Va.,  534 89 

M 

Magruder  v.  Colston,  44  Md.,  349 53 

Marion  N.  Bk.  v.  Thompson  (Ky.),  40  S.  W.  Rep.,  903  .  • 86 

Massey  v.  Fisher,  62  Fed.  Rep.,  958 140 

Mathews  z/.  Columbia  N.  Bk.,  79  Fed.  Rep.,  558 34.38-39 

Mayor  z'.  First  N.  Bk.,  59  Ga.,  648  .   ...  113 

McCann  z/.  First  N.  Bk.  of  Jeffersonville,  112  Ind.,  354 36 

McConville  v.  Gilmore,  36  Fed.  Rep.,  277 160 

McCormick  v.  Market  N.    Bk.  of  Chicago,   162   111.,  100;  165  U.  S., 

538  S.  C 520 

McFarlin  v.  First  N.  Bk.  of  Kansas  City,  68  Fed.  Rep.,  868 33,  52 

McGhee  v.  First  N.  Bk.  Tobias,  40  Neb.,  92 88 

McMahon  v.  Macy,  51  N.  Y.,  155 61 

Mercantile  N.  Bk.  z/.  N.  Y.,  121  U.  S.,  138 108,  109 

"  •'       z/.  Shields,  59  Fed.  Rep.,  952 no 

Mercer  v.  Dyer,  15  Mont.,  317 141 

Merchants'  Bank  v.  State  Bank,  10  Wall.,  604 77 

'*  N.  Bk.  V.  Glendon,  120  Mass.,  97 164 

"  "       V.  Hanson,  33  Minn.,  40 12 

"  "       V.  Sevier,  14  Fed.  Rep.,  662 87 

"  "       z/.  State  N.  Bk.,  10  Wall.,  604 76,77,79 

"  "       z/.  United  States,  loi  U.  S.,  I 145 

Merrill  f.  Florida  Land  and  Imp.  Co.,  60  Fed.  Rep.,  17 57 

Mervill  v.  N.  Bk.  of  Jacksonville,  41  U.  S.  App.,  529   .    .    .  130,  133,  134,  135 

Metropolitan  N.  Bk.,  v.  Clagett,  141  U.  S.,  520 63,  64,  189 

Meyers  v.  Valley  N.  Bk.  13  Nat'l    Bankruptcy  Register,  34 97 

Michigan  Ins.  Bank  v.  Eldred,  143  U.  S.,  293 63 

Miller  z/.  First  N.  Bk.  of  Cincinnati,  46  Ohio  St.,  424 106 

"       V.  Howard,  95  Tenn.,  407    .    .    .    .  • 43 

Missouri  River  Telg.  Co.  v.  First  N.  Bk.  of  Sioux  City,  74  111.,  217  ...      91 

Mix  z/.  N.  Bk.  of  Bloomington,  91  111.,  20 164 

Moore  v.  Jones,  3  Woods,  53 5-^ 

Movius  V.  Lee,  30  Fed.  Rep.,  298 42,  43 

Multnomah  County  v,  Oregon  N.  Bk.,  61  Fed.  Rep.,  912 140 


XV 


N 

PACB 

Nat'l  Bank  v.  Bruhn,  64  Tex.,  S7i 84 

"           z/.  Carpenter,  52  N.  J.  Law,  16S 89 

"  V.  Case,  99  U.  S.,  628 53.  55,  97 

••          V.  Cove,  96  U.  S.,  628, 57 

**           V.  Commonwealth,  9  Wall.,  353 113 

•*          V.  Drake,  35  Kans.,  564 41 

**          V.  Graham,  100  U.  S.,  699 7'  8 

"           V.  Insurance  Co.,  104U.  S.,  54 119 

"          z/.  Johnson,  104  U.  S.,  271 84 

"           V.  Kennedy,  17  Wall.,  19 130 

"  V.  Matthews,  98  U.  S.,  621 12,  18,  22 

♦'           V.  Whitney,  103  U.  S.,  99 12 

Nat'l  Exchange  Bank,  Baltimore,  v.  Peters,  44  Fed.  Rep.,  13 138 

"           "             "       Hartford,  v.  Guy,  57  Conn.,  224 178 

Nat'l  Bank,  Auburn,  t/.  Lewis,  81  N.  Y.,  15 86 

"            Chattanooga,  z/.  Mayor,  8  Heiskell  (Tenn.),  814 113 

"  Commerce  v.  Atkinson,  55  Fed.  Rep.,  465 12,  47 

"  Commonwealth  z/.  Mechanics' N.  Bk.,  94  U.  S.,  437  .   .    133,  1 34 

**           Jefferson  v.  Fare,  25  Fed.  Rep.,  200 188 

"            Guthrie  v.  Earl,  2  Okl.,  617 •    •  16 

"           Rahway  v.  Carpenter,  52  N.  J.  Law,  165 89 

**            Virginia  v.  City  of  Richmond,  42  Fed.  Rep.,  877 106 

"            Winterset  v.  Eyre,  52  Iowa,  114 91 

"            Xenia  v.  Stewart,  107  U.  S.,  676 96 

Nat'l  Park  Bank  of  City  of  N.  Y.  v.  Harmon,  25  C.  C.  A.,  214 ;  79  Fed. 

Rep.,  891 55 

Nat'l  State  Bank  v.  Brainard,  61  Hun.,  339 87 

«'  "         Camden  v.  Pierce,  18  Albany  Law  Jrnl.,  16;  2  N.  Bk. 

Cas.,  177 "3 

Nat'l  State  Bank  of  Oskaloosa  z/.  Young,  25  Iowa,  311 105 

"              "          V.  Young,  25  Iowa,  311 109 

Nat'l  Security  Bank  z^.  Butler,  129  U.  S,  223 138 

«'                   "         V.  Price,  22  Fed.  Rep.,  697 139 

Nelson  f.  Burrows,  9  Abb.  N.  C,  280 137 

Nevada  Bank  of  San  Francisco  v  Portland  N.  Bk.,  59  Rep.,  338  ...    .  15 

Newall  V.  Somerset  First  N.  Bk.  (Ky.),  13  Ky.  L.  Rep.,  275 90 

"        V.  N.  Bk.  of  Somerset,  12  Bush.,  57 85 

New  Orleans  N.  Bk.  v.  Raymond,  29  La.  Ann.,  355 21 

Newton  N.  Bk.  v.  Newbegun,  74  Fed.  Rep.,  135 57 

Niagara  County  Bank  z'.  Baker,  15  Ohio  St.,  85 11 

Norfolk  N.  Bk.  v.  Schwenk,  46  Neb.,  381 86 

V.        "          Neb.,  1895 90 

North  Ward  N.  Bk.  z/.  City  of  Newark,  39  N.J.  Law,  380 108 


XVI 


O 

PAOB 

Gates  V.  First  N.  Bk.,  loo  U.  S.,  239 go 

Ocean  N.  Bk.  v.  Carll,  7  Hun.,  237 161 

O'Connor  z/.  Witterly,  III  Cal.,  523, 58 

O'Hare  v.  Second  N.  Bk.  of  Titusville,  77  Pa.  St.,  96 95 

Ordway  v.  Central  N.  Bk.,  47  Md.,  217 91, 119, 161 

Omn  V.  Merchants'  N.  Bk.,  16  Kans.,  34 21 

Osborne  v.  First  N.  Bk.,  175  Pa.  St.,  494 88 

"        z/.  First  N.  Bk.  of  Athens,  175  Pa.  St.,  474 89 

P 

Pacific  N.  Bk.  v.  Eaton,  141  U.  S. ,  227 a6,  34 

"  "         V.  Mixter,  114  U.  S.,  462;    124  U.  S.,  721,  .   .    .   131,  161,  162 

Palmer  v.  McMahon,  133  U.  S.,  660 108 

Pape  z/.  Capital  Bank  of  Topeka,  20  Kans.,  440 11 

Park  N.  Bk.  of  Chicago  v.  NeblacK,  67  111.  App.,  583 128 

Pattison  v.  Syracuse  N.  Bk.,  80  N.  Y.,  82,  92 7,  8 

Paul  y.  McGraw,  3  Wash.  St.,  296 113 

Pauly  f.  State  Loan  and  Trust  Co.,  165  U.  S.,  606 54 

Pelton  z/.  Commercial  N.  Bk.,  loi  U.  S.,  143 108,  114 

People  V.  Commissioners,  4  Wall,  241 iii 

V.  Dolan,  36  N.  Y.,  59 no 

V.  Remington,  121  N.  Y.,328 134 

V.  Weaver,  100  U.  S.,  539,  reversing  S.  C,  67  N.  Y.,  516  ....     no 
People's  Bank  of  the  City  of  N.  Y.  v.  Mechanics'  N.  Bk.  of  Newark,  62 

How.  Pr.,  422 162 

Peterborough  N.  Bk.  v.  Childs,  133  N.  Y.,  248 86 

Peters  z*.  Commercial  N.  Bk.,  142  U.  S.,  614 188 

"       V.  Foster,  56  Hun.,  607 128,  131 

"       et  al  V.  Bain,  133  U.  S.,  670 50 

Petition  of  Piatt,  1  Benedict,  534 129 

Philler  z;.  Patterson  (Pa.),  168  Pa.  St.,  468 9 

Pickett  z/.  Merchants' N.  Bk.  of  Memphis,  34  Ark.,  346 87 

Pittsburgh  Locoe.  &  Car  Works  v.  State  N.  Bk.,  U.  S.  Cir.  Ct,,  1875; 

Thompson  N.  Bk.  Cases,  315 9 

Planters'  L.  and  S.  Bank  v.  Berry,  Ga.,  1893 162 

Piatt  V.  Beach,  2  Benedict,  303 131 

"    V.  Beebe,  57  N.  Y.,  339 i,  127 

Potter  V.  United  States,  U.  S I54 

Prescott  V.  Haughey,  65  Fed.  Rep.,  653 138 

N.  Bk.  V.  Butler,  157  Mass.,  548 12,  18 

Price  z/.  Abbott,  17  Fed.  Rep.,  506 131 

z*.  Coleman,  2*  Fed.  Rep.,  694 I39 

V.  Yates,  19  Alb.  Law  Journal,  295  ;  2  N.  Bk.  Cases,  204  ...   .  58,  129 


II 
II 


II 


XVll 


R 

PAGB 

Raynor  y.  Pacific  N.  Bk.,  93 N.  Y,  371         162 

Reynolds  J'.  Crawfordsville  Bank,  112  U.  S.,  405  . 12,  22 

Kichniond  v.  Irons,  121  U.  S.,  27 48,50.51,  "8,  127 

Riddle  J'.  First  N.  Hk.,  27  Fed.  Rep.,  503 76 

Roberts  v.  Hill,  23  Fed.  Rtp.,  31        .    .    •    •    • 139 

Robertson  v.  Buffalo  Co.  N.   Bk.  (Neb  ),  40  Neb.,  235 16 

Robinson  v.  Hall,  63  Fed.  Rep.,  222 43,  44,  132 

"         V.  Hill,  63  i''ed.  Rep.,  522 17 

"         V.  Tiirrentine,  59  Fed.  Rep.,  554 49 

Rockwell  V-  Farmers'  N.  Bk.,  4  Colo.  App.,  562 84,  86 

Rosenblatt  v.  Johnson,  T04  U.  S.,  462 112 

RufFin  z'.  Board  of  Commissioners,  69  N- C,  498 113 

S 

San  Diego  County  z>-  California  N.  Bk.,  52  Fed.  Rep.,  59 140 

Schrader  v.  Manufacturers'  N.  Bk.,  133  U-  S.,67 48 

Schroder  v.  Manufacturers'  N.  Bk.  of  Chicago,  133  U.  S.,  67 118 

Schuyler  N.  Bk.  z/.  BuUong,  28  Neb.,  684 88,91,161 

"           "        V.  Bullong,  24  Neb.,  321 88 

Scott  z/.  Armstrong,  146  U.  S.,  499 141 

Second  N.  Bk.  of  Oswego  v.  Burt,  93  N.  Y.,  233 93 

Seeber  v.  Commercial  N.  Bk.  of  Ogden,  77  Fed.  Rep.,  957 19 

Seeley  v.  N.  Y.  Nat'l.  Exc.  Bank,  8  Daly,  400 ;  affirmed  78  N.  Y-,  608  .  36 

Seligman  v.  Charlottesville  N.  Bk.,  3  Hughes,  647 12 

Shafer  v.  First  N.  Bk.,  53  Kans.,  614 87 

Slioemaker  v.  Nat'l.  Mechs'.  Bank,  2  Abb.  U.  S.,  416;  N.  Bk.  v.  Case, 

96  U.  S.  628 9 

Shunk  V.  First  N  Bk.  of  Gallon,  22  Ohio  St.,  508 87 

Simons  v.  Fisher,  55  Fed.  Rep.,  905 47 

Slaughter  v.  First  N.  Bk.  of  Montgomery,  109  Ala.,  157  .    .    .90,  92,  117,  153 

Smith  V.  Exchange  N.  Bk.  of  Pittsburg,  26  Ohio  St.,  141 n,  90 

"      V.  First  N   Bk.,  45  Neb.,  444 95 

"      V.  First  N.  Bk.,  42  Neb.,  687 89 

Smithson  v.  Hubbell,  8x  Fed.  Rep.,  593 189 

Snohomish  Co.  v.  Puget  Sound  N.  Bk.,  Everett,  81  Fed.  Rep.,  518     .    .  188 

Snyder  z'.  Mount  Sterling  N.  Bk.,  94  Ky.,  231 88 

Sowles  z".  Witters  et  al.,  39  Fed.  Rep.,  403 59 

Spofford  V.  First  N.  Bk.  of  Tama  City,  37  Iowa,  181 9 

Spokane  County  v.  Clark,  6r  Fed.  Rep.,  538 140 

StaflFord  N.  Bk.  v.  Davis,  59  N.  H.,  38 108 

Stanton  v.  Wilkison,  8  Benedict,  357 48,  131 

State  V.  Bardwell,  72  Miss.,  535 152 

"     z'.  Fields  (Iowa),  62  N.  W.  Rep.,  653 152 

t/.  Menke,  52  Bankers' Magazine,  33  ;      153 


(I 


XVIU 

PAOB 

State  r.  Tuller,  34  Conn.,  280 152 

Stephens  z/,  Bernay,  41  Fed.  Rep.,  401 131 

•'        V.  FoUett,  43  Fed.  Rep.,  842 52 

"        V.  Monongahela  Bank,  iii  U.S.,  197 90 

"         V.  Overstolz,  43  Fed.  Rep.,  465 137 

"         V.  Overstolz,  43  Fed.  Rep.,  771 138 

Stewart  v.  The  Nat'l  Union  Bank  of  Maryland,  2  Abb.  U.  S.,  424  ...  95 

St.  Louis  N.  Bk.  v.  Pafin,  3  Cent.  L.  J.,  669 ;  i  Nat'l  Bank  Cas.,  326  .    .  108 

Strong  V.  Southwortli,  8  Ben.,  331 58 

Stuart  z>.  Hayden,  169  U.  S.  i 55,  56 

Supervisors  i>.  Stanley,  105  U.  S  ,  305 110 

Sykes  v.  Canton  First  N.  Bk.,  2  S.  D.  242 7 

T 

Talbott  f.  Silver  Bow  Co.,  139  U.  S,  441,  438 108,112 

Talmage  v.  Third  N.  Bk.,  27  Hun.,  61 160 

Tapley  v.  Martin,  116  Mass.,  275 18,  i6.v 

Taylor  v.  Hutton,  43  Bach.,  195 46 

Teague  v.  First  N.  Bk.,  Salina,  48  Pac,  603 90 

Thatcher  v.  West  River  N.  Bk.,  19  Mich.,  196 164 

Thayer  v.  Butler,  141  U.  S.,  234 26,  52 

Third  N.  Bk.  v.  Blake,  73  N.  Y..  260 9,  22 

"       V.  Hughes,  76  Fed.  Rep.  385     114 

"       of  Philadelphia  z/.  Miller,  90  Pa.  St.,  241 87 

Thomas  v.  City  N.  Bk.  of  Hastings,  40  Neb.,  501 13 

"        z/.  Farmers'  Bank  of  Maryland,  46  Md.,  43 65 

Thompson  f.  German  Insurance  Co. ,  76  Fed.  Rep.  892 58,131 

"  J'.  St.  Nicholas  N.  Bk.  146U.  S.,  240;  S.  C,  113;  Is.  Y.,  325  .  12,  loi 

Tiffany  z/.  N.  Bk.,  18  Wallace,  409 83 

Tillinghast  v.  Bailey,  86  Fed.  Rep.,  46 52 

Timberlake  r.  First  N.  Bk.,  43  Fed.  Rep.,  231 85,88,89,91 

Tootle  z/.  First  N.  Bk.  of  Port  Angeles,  6  Wash.,  181 18 

Town  Council  of  Lexington  v.  Union  N.  Bk.,  22  S.  Rep.,  291 18 

Town  of  Farmington  za  Downing,  Supreme  Ct.  of  N.  H.,  3oAtl.  Rep.  345  .    no 

Tracey  v  Talmage,  18  Barb.  456 11 

Traders'  N.  Bk.  v.  Chipman,  164  U.  S.,  347 142 

Trenholm,  Compt.  of  Cy.  v.  Commercial  N.  Bk.  of  Dubuque,  38  Fed. 

Rep.,  323 ■ 136 

Trustees  First  Presbn.  Church  v.  Nat'l  State  Bk.,  57  N.  J.  Laws,  27  .  .  19 
Turner  v.  First  N.  Bk.,  2  Iowa,  562 134 

u 

United  States  v.  Allen,  47  Fed.  Rep.,  696 149 

"  "       V.  Britton,  108  U.  S.,  193,  199 148 

"  "       I'.  Britton,  107  U.  S..  655 147,  148 

"  "       V.  Cadwallader,  59  Fed.  Rep.,  677 154 


xtx 

FAAB 

United  Slates  v.  Curtis,  107  U-  S.,  671 40,  15 j 

V.  Crecelius,  34  Fed.  Rep.,  30 148 

V.  Ege,  49  Fed.  Rep.,  852 150 

"       V.  Eno,  56  Fed.  Rep.,  218 153 

"       V.  Fisii,  24  Fed.  Rep.,  585 148 

"       V.  French,  57  Fed.  Rep.,  382 154 

"       V.  Graves,  53  Fed.  Rep.,  634,  700 12,  149,  150,  151 

e-.  Harper,  33  Fed.  Rep.,  471 147,148,149 

"       V.  Hiighitt,  45  Fed  Rep  ,  47 149 

"       V.  Jevvett,  85  Fed.  Rep.,  142 154,  155 

"       V.  Knox,  102  U.  S.,  422 48 

"       z/.  Means  et  al,  42  Fed.  Rep,  599 .    .    149 

"       V.  Northway,  129  U.  S.,  327 153 

V.  Potter,  56  Fed.  Rep.,  83 154 

"       V.  Taintor,  11  Blatchford,  374 148 

"       V.  Warner,  26  Fed.  Rep.,  616 153 

"       ex  rel.  Cond  v.  Barry,  36  Fed.  Rep.,  246 39 

"       ex  rel.  White  v.  Knox,  102  U-  S i 

"       z/.  N.  Bk.  of  Asheville,  73  Fed.  Rep.,  379 62 

"       t/.  First  N.  Bk.  of  Little  Rock,  79  Fed.  Rep,,  296   .    .    .    13,47 

U.  S.  Supreme  Ct.  in  Van  Allen  v.  Assessors,  3  Wall.,  573 29 

Upton  i/.  N.  Bk.  of  South  Reading,  1 20  Mass.,  153 21 


Van  Allen  v.  The  Assessors,  3  Wall.,  573 105,  109,  jii 

Van  Lenven  v.  First  N.  Bk. ,  54  N.  Y.,  671  ....       10 

Van  Slyke  v.  State,  26  Wis.,  655 iii 

Veazie  Bank  v.  Fenno,  8  Wall.,  533      145 

Venango  N.  Bk.  v.  Taylor,  56  Pa.  St.,  14 141 

W 

Waite  z^.  Dowl,  94  U.  S,  527 113 

Walden  N.  Bk.  v.  Birch,  130  N.  Y,,  221 97 

Walker  t'.  Windsor  N.  Bk.,  56  Fed.  Rep.,  76 188 

Washington  N.  Bk.  of  Tacoma  v.  Eckels.  57  Fed.  Rep.,  870  ....    119,  127 

"  "        V.  King's  County,  9  Wash,,  607 109,  114 

Watkins  v.  N.  Bk.  of  Lawrence,  51  Kan.,  254 118,  119 

Weber  v.  Spokane  N.  Bk.,  64  Fed  Rep.,  208 98 

Weckler  v  First  N.  Bk.  of  Hagerstown,  42  Md.,  581 9 

Welles  V.  Graves,  41  Fed.  Rep.,  459 137,  138 

"       V.  Larrabee  et  al.,  36  Fed.  Rep.,  866 55,  61 

V.  Stout,  38  Fed.  Rep.,  807 57 

Western  N.  Bk.  v.  Armstrong,  152  U.  S.,  346 14 

Westervelt  v.  Mohrenstecher,  40  U.  S.  App.  227 17 

Wheeler  v.  Union  N.  Bk.,  96  U.  S.,  785 91.  9a 

Wheelock  r.  Kost,  77  111.,  296 53.  57.  127 


XX 

t 

PAGE 

Whitbeck  v.  -Mercantile  Bank,  127  U.  S.,  193 108 

White  V.  Knox,  iii  U.  S.,  784 i^^i^  134 

Whitney  v.  Butler,  118  U.  S.,  655 50 

"        N.  Bk.  V.  Parker,  41  Fed.  Rep.,  402 106 

Wickham  v.  Hull,  60  Fed.  Rep.,  326 48, 189 

Wichita  N.  Bk.  v.  Smith,  36  U.  S.  App.,  530 188 

Wiley  V.  Starbuck,  44  Ind.,  298 85,  90 

"      V.  First  N.  Bk.  of  Brattleboro,  47  Vt..  546 8 

Williams  v.  American  N.  Bk.,  Arkansas  City,  85  Fed.  Rep ,  376  ....      34 

Winter  z/.  Baldwin,  89  Ala.,  483 24 

Witters  :;.  Foster,  28  Fed.  Rep.,  737 160,  188 

"        V.  Sowles,  35  Fed.  Rep.,  640 49 

"        V.  Sowles,  38  Fed.  Rep.,  700 49 

Wolverton  v.  Exchange  N.  Bk.,  11  Wash.  94 87 

Woodward  f.  Ellsworth,  4  Colo.,  5S0 112 

Wright  z/.  First  N.  Bk.,  8  Bliss,  243 89 

"       V.  Merchants'  N.  Bk.,  i  Flippin,  561 127 

Wylie  i^.  Northampton  Bk.,  119  U.  S.,  361 8 

Wyman  v.  Citizens'  N.  Bk.,  Fairibault,  29  Fed.  Rep.,  734 95 

Y 

Yakima  N.  Bk.  v.  Kinne,  6  Wash.,  348 85,  164 

Yardley  v.  Clothier,  49  Fed.  Rep.,  337  ;  51  Fed.  Rep.,  506 141 

"        V.  Wilgus,  56  Fed.  Rep.  965 52 

Yerkes  t'.  N.  Bk.  of  Port  Jervis,  69  N.  ¥.,  383 10,11 

Young  V.  McKay,  50  Fed.  Rep.,  397,  594 25,  51 

''      z/.  Wenipke,  46  Fed.  Rep.,  354 12S 

SUPPLEMENTARY   CASES    CITED. 

[See  Supplement,  page  303.] 

Aldrich  v.  Campbell,  97  F'ed.  R.ep.,  663 308 

Aldrich  v.  Chemical  N.  Bk,,  176  U.  S.,  618 305,  311 

Aldrich  v.  Yates,  95  Fed.  Rep.,  78 309 

Auten  V.  Manistee  N.  Bk.,  54  vS.  W.  Rep.,  337 313 

Auten  V.  Manistee  N.  Bk.,  54  S.  W.  Rep.,  337 310 

Bailey  v.  Tilliughast,  99  Fed.  Rep.,  Soi 30S,  309,  314 

Bank  z'.  Williams,  58  N.  J.  Law,  45 3'5.  316 

Binghampton  Trust  Company  v.  Auten,  57  vS.  W.  Rep.,  1105 306 

Bletz  V.  Bk.  of  Kentucky  (Ky.),  55  S.  W.  Rep.,  697 304 

Board  of  Com'rs  of  Morgan  Couuty  v.  isl  N.  Bk.,  57  N.  E.  Rep.,  728  .    .    315 

Bowen  v.  Needles  N.  Bk.,  94  Fed.  Rep.,  935 303 

Brown  v.  Ellis,  103  Fed.  Rep.,  834 309,  314 

Buffalo  German  Ins.  Company  v.  3d  N.  Bk.  of  Buffalo,  162  N.  Y.,  163  .    .    306 


XXI 

PAOK 

Central  N.  Bk.  v.  Haseltiiie,  55  S.  W.  Rep.,  1015 306 

City  and  County  of  Saii  Francisco  v.  Crocker  Woolworth  N.  Bk.,  93  Fed. 

Rpp  .  273 315 

Daggs  V.  PhcEuix  N.  Bk.,  177  U.  S.,  549 305 

Dennis  v.  ist  N.  Bk.  of  Seattle,  59  Pac.  Rep.,  777 313 

Earle  f.  Penna.,  178  U.  S.,  449 313 

Earle  as  Receiver  of  the  Chestnut  St.  N.  Bk.  v.  Conway,  178  U.  S.,  456  .  313 

First  N.  Bk.  of  Concord  v.  Hawkins,  174  U.  S.,  364 303 

First  N.  Bk.  of  Grand  Forks  z^.  Anderson,  172  U.  S.,  573 305 

First  N.  Bk.  v.  Riggins,  32  S.  E.  Rep.,  801 309 

First  N.  Bk.  of  Wellington  v.  Chapman,  173  U.  S.,  205 314,  315 

Farmers' N.  Bk.  of  Owatonna  z/.  Backus,  77  N.  W.  Rep.,  14a 307 

Frater  v.  Old  N.  Bk.,  loi  Fed.  Rep.,  391 308 

Gad.«;en  v.  Thrush,  76  N.  W.  Rep.,  1060 305 

George  v.  Somerville  (Mo.),  Bankers'  Magazine,  Vol.  LX,  p.  391   .    .    .  305 

Gilbert  v.  McNulta,  Bankers'  Magazine,  Vol.  LIX,  p.  752 312 

Groos  V.  Brewster  (Tex.),  55  S.  W.  Rep.,  590 303 

Guarantee  Company  of  N.  D.  v.  Hanway,  104  Fed.  Rep.,  369 313 

Haseltine  v.  Central  N.  Bk.,  Bankers'  Magazine,  Vol.  LX,  p.  48     ...  306 

Hayden  v.  Williams,  96  Fed.  Rep.,  279 312 

Hazen  v.  Lyndonville  N.  Bk.,  41  Atl.  Rep.,  1046 305 

Hulitt  V.  Bell,  85  Fed.  Rep.,  98 307 

In  re  Rarle,  92  Fed.  Rep.,  22 311 

In  re  Earle,  96  Fed.  Rep.,  678 312 

/«  ;r  Hulitt,  6th  Ct.,  96  Fed.  Rep.,  785 311 

Jenkins  v.  NeflF,  163  N.  Y.,  320 315 

Lealos  v.  Union  N.  Bk.,  Bankers'  Magazine,  Vol.  LIX,  p.  24 306 

Lealos  v.  Union  N.  Bk.,  Bankers'  Magazine,  Vol.  LX,  p.  240 306 

Lull  z/.  Anamosa  N.  Bk.,  81  N.  W.  Rep.,  784 316 

McDonald  V.  Chemical  N.  Bk.,  174  U.  S.,  610 310 

McDonald  z*.  Williams,  174  U.  S.,  397 311 

Mechanics  N.  Bk.  v.  Baker,  46  Atl.  Rep.,  586 315,  316 

Merrill  v.  N.  Bk.  of  Jacksonville,  173  U.  S.,  131 311 

People's  Stale  Bk.  of  Lakota  f.  Francis,  79  N.  W.  Rep.,  853 312 

Richardson  v.  Turner,  52  La.  Ann.,  1613 312 

Robinson  v.  Southern  N.  Bk.,  94  Fed.  Rep.,  964 307 

Schaberg's  Estate  v.  McDonald,  83  N.  W.  Rep.,  737 309,  312 

Schofield  'i>.  State  N.  Bk.,  97  Fed.  Rep.,  282    ...    .        15 

vScott  V.  Latimer,  89  Fed  Rep.,  843 307,  308 

Stout  V.  Lusk,  59  Pac.  Rep.,  603 307 

Stuart  z'.  Staplehurst  (Neb.),  78  N.  W.  Rep.,  298 309 

Studebaker  v.  Perry,  102  Fed.  Rep.,  947 308 

Tourtelot  v.  Stoltenben,  10 1  Fed  Rep.,  362 308 

Watt  V.  1st  N.  Bk.,  Lake  Beutou,  Minn.,  79  N.  W.  Rep.,  509 306 


zziii 


INDEX  TO  SECTIONS  OF  REVISED  STATUTES. 


Section. 


324,  32.V... 

82e  to  32!l. 

830  tu  333. 

880 

663 

029 

711 

736 

884,  885.... 
3410  to  3412 
8413  to  3416 

8417 

8686  to  36»U 

8820 

3701 

8811 

8847 

4046 

6133,  6134... 
6136,  6136... 

6137 

8138 

6189 

6140 , 


Page. 


1 

2 

3 

10.3 

159 

169 

160 

163 

163 

143 

144 

146 

194 

237 

145 

4 

238 

288 

6 

6 

IS 

23 

24 

27 


Section. 


5141 

5142 

5143 

:i44 

6145  to  6147 

6118,6149... 

6150 

6151 

6152 

6153 

6154 

6156,  5156... 

5157  to  5159. 

5160  to  5162. 

5163,6164..., 

6165  to  6167. 

I  6168 

'  6169 , 

6170 

5171 

5172 

6173  to  5176. 
,  6176  to  6178. 


Page. 


28 
31 
34 

87 
39 
45 
46 
47 
60 
61 
62 
65 
66 
67 
68 
69 
29 
30 
i\\ 
70 
71 
72 
73 


Section. 


Page. 


5179,6180... 
6181,5182... 
6183,6184... 
518.1,  6186... 

6187 

6188,6189.... 
6190 

6191  

6192  to  5196 
6196,6197... 

6198 

6199 

5200 

6201 

6202 

5203,  5204..., 

6205 

5206 

6207 

6208 

5209 

5210,6211..., 
6212  to  5214. 


74 

76 

76 

77 

146 

78 

79 

80 

81 

83 

86,  ICO 

92 

03 

96 

97 

98 

99 

100 

146 

101 

146 

102 

103 


Section. 


g». 


5215  to  6218 

5219 

5220 

5221 

6222,6223..., 

6224 

6225,6226.... 
5227  to  5229, 
5230  to  6232, 
5233,6234..., 
5235,5236..., 

52.37 

6238,6239..., 

5240 

6^41 , 

5242 

5243 

5413,6416.... 
5430 

.Hal 

6433  to  6434. 

5437 

6497 


104 
106 
118 
120 
121 
128 
12S 
124 
126 
126 
133 
135 
136 
115 
116 
138,  161 
ll'i 
155 
155 
l,'i6 
157 
1.57 
158 


ADDITIONAL  ACTS. 


Aot  of  June  10,  1874.. 


Extract  from  Act  of  June  23,  1874. 
Act  of  JanUHrv  14,  1875 


Act  of  Jttiiusri  19,  1876 

Extract  from  Act  of  February  8,  1876 16,  19,  20 

■(  It  11  i«        « 

Extracts  from  Act  of  February  18,  1876 

Act  of  June  30,  1876 


Bxtreet  from  Act  March  1,  1879. 

Act  of  February  14,  1880 

Act  of  February  26,  1881 

Act  of  July  12,  1882 


Bxtract  from  Act  of  March  8,  1883.. 
Act  of  Marcl)  2J,  1886 


Act  of  May  1,  lft86.. 


Extract  from  Act  of  July  30,  18S6.. 
Aot  of  March  .3,  18rf7 


Extract  from  Act  of  August  13,  1888 

Extract  from  Act  of  Jliiy  '2,  1890 

Extract  from  Act  of  July  14,  1890 

Extract  from  Act  of  May  12,  1892 

Actof  Julv  28,  1892 

Act  .Of  August  13, 1894 

Act  of  .Miuuh  2,  1897 

Legal  Tender  and  Lawful  Money,  definition  of  terms 

Extract  from  Act  of  March  14,  1900 10  to  13 

Act  approvec"  April  12,  1902 

Act  approved  March  3, 1903 


8«ctlon. 

Pag*. 

1  toS 

165 

4 

167 

6to7 

168 

8,9 

169 

170 

1 

170 

2,3 

171 

172 

6,  19,  20 

172 

21 

173 

173 

1.2 

173 

3 

174 

4  to  6 

175 

17« 

176 

178 

1  to  3 

177 

4,6 

178 

6 

179 

7,8 

180 

9  toll 

181 

12,  13 

182 



183 

1 

183 

2.3 

184 

1 

184 

2 

186 

3,4 

186 

6 

l»o 

1 

186 

2,3 

187 

4 

187 

17 

100 

6 

180 

191 

191 

1 

101 

8 

192 

197 

0tol3 

311 

319 

S20 

PRATTS'  DIGEST. 


PART    FIRST. 

TKE   LAWS   RELATING  TO   NATIONAL  BANKS, 


WITH    ANNOTATIONS. 


CHAPTER    I. 


THE  COMPTROLLER  OF  THE  CURRENCY. 


I.    Bureau  of  Comptroller  of  the  Currency. 

Section  324. — There  shall  be  in  the  Department  of  the  Treasury  a  Bureau 
charged  with  the  execution  of  all  laws  passed  by  Congress  relating  to  the 
issue  and  regulation  of  a  National  currency  secured  by  United  States  bonds ; 
the  chief  officer  of  which  Bureau  shall  be  called  the  Comptroller  of  the  Cur- 
rency, and  shall  perform  his  duties  under  the  general  direction  of  the  Secre- 
tary of  the  Treasury. 

See  Kennedy  v.  Gibson,  8  WalL,  498;  Piatt  v.  Beebe,  57  N.  Y., 

339;  Charleston  <'.  People's  National   Bank,  5  S.  C,  103;  Case  v. 

Terrill,  11  Wall.,  199;  United  States  ex  rel.  White  v.  Knox,  102 

U.  S. 

2.     ComptrotJer  of  the  Currency. 

Section  325. — The  Comptroller  of  the  Currency  shall  be  appointed  by  the 
President,  on  the  recommendation  of  the  Secretary  of  the  Treasury,  by  and 
with  the  advice  and  consent  of  the  Senate,  and  shall  hold  his  office  for  the 
term  of  five  years  unless  sooner  removed  by  the  President,  upon  rea- 
sons to  be  communicated  by  him  to  the  Senate ;  and  he  shall  be  entitled  to  a 
salary  of  five  thousand  dollars  a  year. 

The  Comptroller  of  the  Cnrrencj'^  is  also  ex  officio  Commissioner 
of  the  Freedmen's  Savings  Bank,  and  for  this  receives  an  additional 
$1,000  per  annum. 

I  I 


3.    Oath  and  Bond  of  Comptroller. 

Section  326. — The  Comptroller  of  the  Currency  shall,  within  fifteen  days 
from  the  time  of  notice  of  his  appointment,  take  and  subscribe  the  oath  of 
office;  and  he  shall  give  to  the  United  States  a  bond  in  the  penalty  of  one 
hundred  thousand  dollars,  with  not  leas  than  two  responsible  suredes,  to  be 
approved  by  the  Secretary  of  the  Treasury,  conditioned  for  the  faithful  dis- 
charge of  the  duties  of  his  office, 

4.    Deputy  Comptroller:  Duties,  etc. 

Section  327. — There  shall  be  in  the  Bureau  of  the  Comptroller  of  the  Cur- 
rency a  Deputy  Comptroller  of  the  Currency,  to  be  appointed  by  the  Secre- 
tary, who  shall  be  entitled  to  a  salary  of  two  thousand  five  hundred  dollars  a 
year,  and  who  shall  possess  the  power  and  perform  the  duties  attached  by 
law  to  the  office  of  Comptroller  during  a  vacancy  in  the  office  or  during  the 
absence  or  inability  of  the  Comptroller.  The  Deputy  Comptroller  shall  also 
take  the  oath  of  office  prescribed  by  the  Constitution  and  laws  of  the  United 
States,  and  shall  give  a  like  bond  in  the  penalty  of  fifty  thousand  dollars. 

The  court  will  take  judicial  notice  of  the  fact  that  a  certain  per- 
son was  on  a  certain  day  the  Deputy  Comptroller  of  the  Currency  ; 
and  where  he  has  signed  a  certificate  as  "Acting  Comptroller," 
the  court  will  assume  that  at  the  date  of  such  certificate  he  was 
authorized  to  exercise  the  powers  and  discharge  the  duties  of 
Comptroller.     (Keyser  v.  Hitz,  133  U.  S.,  438.) 

5 .    Clerks. 

Section  328. — The  Comptroller  of  the  Currency  shall  employ,  from  time 
to  time,  the  necessary  clerks,  to  be  appointed  and  classified  by  the  Secretary 
of  the  Treasury,  to  discharge  such  duties  as  the  Comptroller  shall  direct. 

While  this  section  retains  the  appointing  power  in  the  hands  of 
the  Secretary  of  the  Treasury,  it  appears  to  indicate  that  the 
Comptroller  is  to  be  the  judge  of  the  force  necessary  to  perform 
the  work  of  his  office. 

6.    Interest  in  National  Banks  Prohibited. 

Section  329. — It  shall  not  be  lawful  for  the  Comptroller  or  the  Deputy 
Comptroller  of  the  Currency,  either  directly  or  indirectly,  to  be  interested  in 
any  association  issuing  National  currency  under  the  laws  of  the  United 
States. 

This  section  is  not  to  be  taken  in  its  strict  literal  sense,  but  is 
to  be  construed  so  as  to  carry  out  the  obvious  intention  of  Con- 
gress, which  was  to  forbid  the  Comptroller  and  the  Deputy  Comp- 
troller from  having  any  interest  in  the  banks  over  vv^hich  they  are 
to  exercise  a  supervision. 


7.    SeaJ  of  Office. 

Section  330. — The  seal  devised  by  the  Comptroller  of  the  Currency  for  his 
office,  and  approved  by  the  Secretary  of  the  Treasury,  shall  continue  to  be 
the  seal  of  office  of  the  Comptroller,  and  may  be  renewed  when  necessary. 
A  description  of  the  seal,  with  an  impression  thereof,  and  a  certificate  of  ap- 
proval by  the  Secretary  of  the  Treasury,  shall  be  filed  in  the  office  of  the 
Secretary  of  State. 

As  amended  by  act  of   February  18,    1875,  correcting  Revised 

Statutes. 

8.    Offices,  Vaults,  etc.,  for  Bureau. 

Section  331. — There  shall  be  assigned  from  time  to  time,  to  the  Comp- 
troller of  the  Currency,  by  the  Secretary  of  the  Treasury,  suitable  rooms  in 
the  Treasury  building  for  conducting  the  business  of  the  Currency  Bureau, 
containing  safe  and  secure  fire-proof  vaults,  in  which  the  Comptroller  shall 
deposit  and  safely  keep  all  the  plates  not  necessarily  in  the  possession  of 
engravers  or  printers,  and  other  valuable  things  belonging  to  his  Depart- 
ment ;  and  the  Comptroller  shall  from  time  to  time  furnish  the  necessary 
furniture,  stationery,  fuel,  lights,  and  other  proper  conveniences  for  the  trans- 
action of  the  business  of  his  office. 

9.     Examination  of  Banks  in  District  of  Columbia. 

Section  332. — The  Comptroller  of  the  Currency,  in  addition  to  the  powers 
conferred  upon  him  by  law  for  the  examination  of  National  banks,  is  further 
authorized,  whenever  he  may  deem  it  useful,  to  cause  examination  to  be  made 
into  the  condition  of  any  bank  in  the  District  of  Columbia  organized  under 
act  of  Congress.  The  Comptroller,  at  his  discretion,  may  report  to  Congress 
the  results  of  such  examination.  The  expense  necessarily  incurred  in  any 
such  examination  shall  be  paid  out  of  any  appropriation  made  by  Congress 
for  special  bank  examinations. 

10.    Annual  Report  of  Comptroller. 

Section  333. — The  Comptroller  of  the  Currency  shall  make  an  annual 
report  to  Congress,  at  the  commencement  of  its  session,  exhibiting — • 

First.  A  summary  of  the  state  and  condition  of  every  association  from 
which  reports  have  been  received  the  preceding  year,  at  the  several  dates  to 
which  such  reports  refer,  with  an  abstract  of  the  whole  amount  of  banking 
capital  returned  by  them,  of  the  whole  amount  of  their  debts  and  liabilities, 
the  amount  of  circulating  notes  outstanding,  and  the  total  amount  of  means 
and  resources,  specifying  the  amount  of  lawful  money  held  by  them  at  the 
times  of  their  several  returns,  and  such  other  information  in  relation  to  such 
associations  as,  in  his  judgment,  may  be  useful. 

Second.  A  statement  of  the  associations  whose  business  has  been  closed 
during  the  year,  with  the  amount  of  their  circulation  redeemed  and  the 
amount  outstanding. 

Third.  Any  amendment  to  the  laws  relative  to  banking  by  which  the  sys- 


tern  may  be  improved  and  the  security  of  the  holders  of  its  notes  and  other 
creditors  may  be  increased. 

Fourth.  A  statement  exhibiting  under  appropriate  heads  the  resources  and 
habilities  and  condition  of  the  banks,  banking  companies,  and  savings  banks 
organized  under  the  laws  of  the  several  States  and  Territories ;  such  informa- 
tion to  be  obtained  by  the  Comptroller  from  the  reports  made  by  such  banks, 
banking  companies,  and  savings  banks  to  the  legislatures  or  officers  of  the 
different  States  and  Territories,  and,  where  such  reports  can  not  be  obtained, 
the  deficiency  to  be  supplied  from  such  other  authentic  sources  as  may  be 
available. 

Fifth.  The  names  and  compensation  of  the  clerks  employed  by  him,  and  the 
whole  amount  of  the  expenses  of  the  banking  department  during  the  year. 

As  amended  by  act  of  February  i8,  1875,  correcting  Revised 
Statutes. 

The  reports  of  heads  of  Departments  are,  as  a  rule,  made  to  the 
President  of  the  United  States ;  the  only  exception  is  that  of  the 
Secretary  of  the  Treasury,  which  is  made  direct  to  Congress.  The 
reports  of  heads  of  bureaus  in  any  Department  are  usually  made 
to  the  head  of  that  Department,  but  the  Comptroller  of  the  Cur- 
rency, as  seen  above,  reports  direct  to  Congress,  and  not  through 
the  President  or  the  Secretary  of  the  Treasury. 

The  first  report  of  the  Comptroller  of  the  Currency  was  made 
for  the  year  1863  by  the  Hon.  Hugh  McCulloch,  the  first  Comp- 
troller. The  earlier  reports  are  out  of  print,  and  those  of  some  of 
the  later  years  also,  but  copies  of  such  as  are  on  hand  and  can  be 
spared  may  be  obtained  on  application  to  the  Comptroller  of  the 
Currency  by  bankers  and  others  who  are  interested  in  banking 
matters. 

To  meet  the  demand  for  information  relative  to  the  National 
banking  system  and  banking  in  general,  the  supply  of  reports  of 
the  Comptroller  for  several  years  being  exhausted,  the  Comptroller 
has  issued  a  pamphlet  giving  a  compilation  of  all  the  reports  made 
since  the  establishment  of  the  system. 

II.    When  Report  to  be  Printed. 

Section  381  i. — When  the  annual  report  of  the  Comptroller  of  the  Cur- 
rency upon  the  National  banks  and  banks  under  State  and  Territorial  laws 
is  completed,  or  while  it  is  in  process  of  completion,  if  thereby  the  business 
may  be  sooner  dispatched,  the  work  of  printing  shall  be  commenced,  under 
the  superintendence  of  the  Secretary,  and  the  whole  shall  be  printed  and 
ready  for  delivery  on  or  before  the  ist  day  of  December  next  after  the  close 
of  the  year  to  which  the  report  relates. 

As  amended  by  act  of  February  18,  1875,  correcting  revised 
statutes. 


CPI AFTER    II. 


ORGANIZATION  AND  POWERS  OF  NATIONAL  BANKS. 


12.    Formation  of  National  Banlcing  Associations. 

Sectiok  5133. — Associations  for  carrying  on  the  business  of  banking  under 
this  Title  may  be  formed  by  any  number  of  natural  persons,  not  less  in  any 
case  than  five.  They  shall  enter  into  articles  of  association,  which  shall 
specify  in  general  terms  the  object  lor  which  the  association  is  formed,  and 
may  contain  any  other  provisions,  not  inconsistent  with  law,  which  the  asso- 
ciation may  see  fit  to  adopt  for  the  regulation  of  its  business  and  the  conduct 
of  its  affairs.  These  articles  shall  be  signed  by  the  persons  uniting  to  form 
the  association,  and  a  copy  of  them  shall  be  forwarded  to  the  Comptroller  of 
the  Currency,  to  be  filed  and  preserved  in  his  office. 

For  full  details  how  to  proceed  in  the  organization  of  a  National 
Bank,  with  form  of  articles  of  association,  etc.,  see  page  195. 

13.    Organization  Certificate. 

Sectiok  5r34. — The  persons  uniting  to  form  such  an  association  shall, 
under  their  hands,  make  an  organization  certificate,  which  shall  specifically 
state  : 

First.  The  name  assumed  by  such  association ;  which  name  shall  be  sub- 
ject to  the  approval  of  the  Comptroller  of  the  Currency. 

Second.  The  place  where  its  operations  of  discount  and  deposits  are  to  be 
carried  on,  designating  the  State,  Territory,  or  district,  and  the  particular 
county  and  city,  town,  or  village. 

Third.  The  amount  of  capital  stock  and  the  number  of  shares  into  which 
the  same  is  to  be  divided. 

Fourth.  The  names  and  places  of  residence  of  the  shareholders  and  the 
number  of  shares  held  by  each  of  them. 

Fifth.  The  fact  that  the  certificate  is  made  to  enable  such  persons  to  avail 
themselves  of  the  advantages  of  this  Title. 

The  provision  of  law  requiring  that  the  place  where  the  busi- 
ness is  to  be  carried  on  shall  be  stated  in  the  organization  certifi- 
cate refers  to  the  town  or  city,  and  not  to  the  particular  building  or 
street  number.  (McCormick  v.  Market  Nat.  Bank  of  Chicago,  162 
111.,  100.)     As  to  branch  banks  see  note  to  Section  5155,  page  65. 

For  form  of  organization  certificate,  see  page  202. 

5 


6 

I4>     Acknowledgment  of  Organization  Certificate. 

Section  5135. — The  organization  certificate  shall  be  acknowledged  before 
a  judge  of  some  court  of  record,  or  notary  pubHc;  and  shall  be,  together 
with  the  acknowledgment  thereof,  authenticated  by  the  seal  of  such  court,  or 
notary,  transmitted  to  the  Comptroller  of  the  Currency,  who  shall  record  and 
carefully  preserve  the  same  in  his  office. 

For  form  instructions,  see  page  202. 

15.    Corporate  Powers  of  Associations. 

Section  5136. — Upon  duly  making  and  filing  articles  of  association  and 
an  organization  certificate,  the  association  shall  become,  as  from  the  date  of 
the  execution  of  its  organization  certificate,  a  body  corporate,  and  as  such, 
and  in  the  name  designated  in  the  organization  certificate,  it  shall  have 
power — 

First.  To  adopt  and  use  a  corporate  seal. 

Second,  To  have  succession  for  the  period  of  twenty  years  from  its  organi- 
zation, unless  it  is  sooner  dissolved  according  to  the  provisions  of  its  articles 
of  association,  or  by  the  act  of  its  shareholders  owning  two-thirds  of  its  stock, 
or  unless  its  franchise  becomes  forfeited  by  some  violation  of  law. 

Third.  To  make  contracts. 

Fourth.  To  sue  and  be  sued,  complain  and  defend,  in  any  court  of  law 
and  [or]  equity,  as  fully  as  natural  persons. 

Fifth.  To  elect  or  appoint  directors,  and  by  its  board  of  directors  to 
appoint  a  president,  vice-president,  cashier,  and  other  officers,  define  their 
duties,  require  bonds  of  them  and  fix  the  penalty  thereof,  dismiss  such  offi- 
cers or  any  of  them  at  pleasure,  and  appoint  others  to  fill  their  places. 

Sixth.  To  prescribe,  by  its  board  of  directors,  by-laws  not  inconsistent 
with  law,  regulating  the  manner  in  which  its  stock  shall  be  transferred,  its 
directors  elected  or  appointed,  its  officers  appointed,  its  property  transferred, 
its  general  business  conducted,  and  the  privileges  granted  to  it  by  law  exer- 
cised and  enjoyed. 

Seventh.  To  exercise  by  its  board  of  directors,  or  duly  authorized  officers 
or  agents,  subject  to  law,  all  such  incidental  powers  as  shall  be  necessary  to 
carry  on  the  business  of  banking ;  by  discounting  and  negotiating  promis- 
sory notes,  drafts,  bills  of  exchange,  and  other  evidences  of  debt ;  by  receiv- 
ing deposits;  by  buying  and  selling  exchange,  coin,  and  bulhon  ;  by  loaning 
money  on  personal  security ;  and  by  obtaining,  issuing,  and  circulating  notes 
according  to  the  provisions  of  this  Title. 

But  no  association  shall  transact  any  business  except  such  as  is  incidental 
and  necessarily  preliminary  to  its  organization  until  it  has  been  authorized  by 
the  Comptroller  of  the  Currency  to  commence  the  business  of  banking. 

Banking  Powers. — The  banking  powers  here  conferred  are 
such  as  banks  and  bankers  have  custotnarily  exercised.  The  enu- 
meration of  powers  in  the  seventh  subdivision  is  the  usual  formula 


descriptive  of  the  banking  business  contained  in  bank  charters, 
and  is  almost  identical,  except  in  the  order  of  arrangement,  with 
that  contained  in  the  New  York  banking  act  of  1838,  which  is  the 
original  model  upon  which  most  of  the  banking  laws  of  the  coun- 
try have  been  framed.  The  powers  here  specified  are  not  the 
incidental,  but  the  principal  powers,  and  to  them  are  to  be  super- 
added all  incidental  powers.  While  the  statute  specifies  the  main 
things  a  National  bank  may  do,  it  does  not  undertake  to  specify 
all,  and  it  does  not  prohibit  all  not  specified.  For  instance,  the 
business  of  making  collections,  which  forms  a  large  branch  of  the 
banking  business,  is  not  particularly  specified,  but  it  has  never 
been  doubted  that  the  National  banks  have  the  right  and  power 
to  do  this  kind  of  business.  In  general.  National  banks  may 
make  any  contracts  which  legitimately  appertain  to  the  business  of 
banking,  as  defined  by  the  statute.  (Pattison  v.  Syracuse  National 
Bank,  80  N.  Y.,  82.)  But  such  banks  can  exercise  only  the  powers 
expressly  enumerated  in  the  statute,  and  those  powers  which  are 
properly  incidental  to  the  enumerated  powers.  (Logan  County 
National  Bank  v.  Townsend,  139  U.  S.,  67,  73;  Casey  v.  La  So- 
ciety de  Credit  Mobilier  de  Paris,  2  Woods,  77.) 

Deposits. — The  authority  given  National  banks  to  receive 
deposits  also  includes  power  to  contract  as  to  the  parties  to  whom 
deposits  shall  be  repaid.  (Sykes  v.  Canton  First  National  Bank, 
2  S.  D.,  242.)  A  National  bank  may  be  a  depositary  for  the  pub- 
lic money  of  a  city  ;  and  may  agree  to  pay  interest  on  such  depos- 
its, and  give  bond  for  their  security.  (Interstate  National  Bank 
V.  Ferguson,  48  Kans.,  732.) 

Safe  Deposit  Boxes.     [See  Supplement.] 

Special  Deposit. — It  is  also  well  settled  that  National  banks 
may  not  only  receive  deposits  made  in  the  usual  way,  which  are 
known  as  general  deposits,  but  they  may  likewise  receive  special 
deposits.  They  may  receive  deposits  of  bonds  and  securities  for 
safe-keeping,  either  for  a  compensation  or  gratuitously.  (National 
Bank  v.  Graham,  100  U.  S.,  699;  Pattison  v.  Syracuse  National 
Bank,  80  N.  Y.,  82  ;  First  National  Bank  v.  Strang,  138  111.,  347.) 
This  power  has  been  sustained  upon  two  grounds — first,  that  it  is 
incidental  to  the  business  of  banking;  and,  secondly,  that  it  is 
implied  in  the  provisions  of  section  5228,  Revised  Statutes,  which 
authorizes  an  insolvent  association  to  deliver  special  deposits. 

But  the  cashier  or  other  executive  ofl5cer  has  no  authority  to 


8 

bind  the  bank  by  the  receipt  of  a  special  deposit  for  safe-keeping, 
without  an  express  or  implied  authority  from  the  directors,  (First 
National  Bank  of  Lynn  v.  Ocean  National  Bank,  60  N.  Y. ,  278. 
See  also  Wiley  v.  First  National  Bank  of  Brattleboro,  47  Vt.,  546.) 
However,  where  the  bank  habitually  receives  special  deposits 
through  its  cashier,  it  will  be  bound  by  his  acts  in  receiving  the 
same.  (Pattison  v.  Syracuse  National  Bank,  80  N.  Y.,  82,  92; 
Chattahoochee  National  Bank  v.  Schley,  58  Ga.,  360.)  And 
where  a  special  deposit  is  lost  through  the  negligence  of  the 
officers  or  employees  of  the  bank,  the  bank  will  be  liable  to  the 
owner  of  the  deposit.  (National  Bank  v.  Graham,  100  U.  S.,  699.) 
Where  a  special  deposit  made  with  a  bank,  afterwards  reorganized 
as  a  National  bank,  is  converted,  the  measure  of  the  damage  is 
the  value  of  the  deposit  at  the  date  of  the  conversion.  (Coffey  v. 
National  Bank  of  Missouri,  46  Mo.,  140.)  Where  a  National 
bank  receives  United  States  bonds  of  one  class  for  the  purpose  of 
having  them  converted  into  bonds  of  another  class,  it  is  not  a 
mere  mandatary,  but  is  responsible  for  the  failure  to  deliver  the 
bonds  on  demand.  (lycach  v.  Hale,  31  Iowa,  69.)  It  is  competent 
for  a  National  bank  to  take  steps  for  the  recover}^  of  its  property 
stolen  by  burglars,  and  to  agree  to  take  like  steps  for  the  recovery 
of  the  property  of  others  deposited  with  it  for  safe-keeping  and 
stolen  at  the  same  time,  and  want  of  proper  diligence,  skill  and 
care  in  performing  such  an  undertaking  is  ground  of  liability  to 
respond  in  damages  for  failure.  (Wylie  v.  Northampton  Bank, 
119  U.S.,  361.) 

Bank  as  a  Stakeholder. — A  National  bank  may  receive  the 
deposit  of  a  fund  in  controversy  to  abide  the  event  of  a  litigation 
or  award,  or  to  be  payable  upon  a  contingency  to  some  person 
other  than  the  depositor.  So  long  as  the  bank  undertakes  nothing 
more  than  to  pay  over  the  money  deposited  with  it  to  the  person 
who  may,  according  to  the  conditions  upon  which  the  deposit  was 
made,  become  entitled  to  receive  it,  the  bank  does  not  transcend 
its  powers.  Nor  does  it  make  any  difference  that  the  portion  of 
the  sum  deposited  which  may  become  payable  to  a  third  person, 
is,  at  the  time  of  the  deposit,  uncertain  and  subject  to  litigation. 
(Bushnell  v.  Chautauqua  County  National  Bank,  74  N.  Y.,  290.) 

Security  for  Loans. — The  words  "loans  on  personal  security" 
in  the  statute  are  used  in  contradistinction  to  real  estate  security, 


and  the  National  banks  are  not  confined,  in  the  taking  of  security 
for  discounts  and  loans,  to  the  security  afibrded  by  the  names  of 
indorsers  or  personal  sureties,  but  may  take  a  pledge  of  bonds, 
choses  in  action,  bills  of  lading,  or  other  personal  chattels.  It  has 
accordingly  been  held  that  they  may  take  for  this  purpose  a  pledge 
of  the  stock  of  a  corporation  (Shoemaker  v.  National  Mechanics' 
Bank,  2  Abb.,  U.  S.,  416;  see  also  National  bank  v.  Case,  96  U. 
S.,  628);  or  a  warehouse  receipt  for  merchandise  (Cleveland, 
Brown  &  Co.  v.  Shoeman,  40  Ohio  St.,  176);  or  a  locomotive 
(Pittsburgh  Locomotive  and  Car  Works  v.  State  National  Bank, 
U.  S.  Circuit  Court,  1875 ;  Thompson's  National  Bank  Cases, 
315);  or  a  chattel  mortgage  upon  a  stock  of  goods  (Spofford  v. 
First  National  Bank  of  Tama  City,  37  Iowa,  181).  An  indorse- 
ment of  a  promissory  note  by  a  married  woman  by  its  terms 
charging  her  separate  estate  with  the  payment  of  the  note,  is  not 
a  mortgage  in  any  sense ;  it  is  simpl}'  a  personal  security  within 
the  meaning  of  the  National  Bank  Act,  and  is  therefore  a  security 
which  a  National  bank  may  take.  (Third  National  Bank  v.  Blake, 
73  N.  Y.,  260.)  The  question  of  loans  upon  real  estate  security 
is  discussed  under  the  next  section. 

Clearing-House. — There  is  nothing  in  the  National  banking 
law  which  forbids  a  National  bank  to  become  a  member  of  a 
clearing-house  association  organized  merely  for  the  purpose  of 
facilitating  settlements  between  the  members  thereof.  (Philler  et 
al.  V.  Patterson,  168  Pa.  St.  468.) 

Dealing  in  Stocks  and  Bonds. — A  National  bank  has  no  power 
to  deal  in  stocks  and  bonds,  or  buy  and  sell  them  upon  commission. 
Such  operations  are  not  incidental  to  the  business  of  banking  as 
defined  in  the  statute.  (Weckler  v.  First  National  Bank  of  Hagers- 
town,  42  Md.,  581  ;  First  National  Bank  of  Allentown  v.  Hock, 
89  Pa.  St.,  324;  First  National  Bank  v.  National  Exchange  Bank, 
92  U.  S.,  122.)  And  the  prohibition  is  implied  from  the  failure  to 
grant  the  power.  (California  National  Bank  v.  Kennedy,  167  U- 
S.,  362.)  But  there  seems  to  be  good  reason  for  saying  that  a 
different  rule  applies  in  respect  to  Government  Bonds.  It  has 
always  been  the  custom  of  the  National  banks  to  deal  more  or  less 
in  these  securities,  and  such  operations  have  been  generally  en- 
couraged by  the  fiscal  officers  of  the  Government.  It  is  clear  that, 
as  financial  agents  of  the  Government,  they  maj--  be  employed  by 


lO 

the  Government  to  perform  any  duties  in  respect  to  its  bonds  ;  and 
so,  perhaps,  they  may  be  employed  in  this  way  by  others.  It  has 
long  been  the  practice  of  bankers,  both  in  this  country  and  in 
England,  to  buy  and  sell  and  exchange  Government  securities  for 
their  customers,  and  as  it  was  the  policy  of  the  Government  to 
encourage  the  purchase  and  sale  of  its  bonds,  and  facilitate  trans- 
actions in  them,  it  is  not  probable  that  Congress  intended  to  pro- 
hibit National  banks,  the  most  numerous  class  of  financial  agents 
in  the  country,  from  dealing  in  these  bonds  in  a  manner  usual 
among  bankers  and  banking  institutions.  It  has  been  decided  by 
State  courts  of  high  authority  that  the  National  banks  have  power 
to  receive  United  States  bonds  of  one  class  for  the  purpose  of  hav- 
ing them  converted  into  bonds  of  another  class,  and  that  the 
exchanging  of  Government  securities  is  a  legitimate  part  of  their 
business.  (Yerkes  v.  National  Bank  of  Port  Jervis,  69  N.  Y.,  383  ; 
Van  Lenven  v.  First  National  Bank,  54  N.  Y.,  671;  Leach  v. 
Hale,  31  Iowa,  69.)  In  the  case  first  cited  it  was  said  :  "We  may 
take  judicial  notice  of  the  fact  that  Government  bonds  are  usually 
bought  and  sold  through  banks,  and  that  all  the  transactions  in 
reference  to  them  with  the  Government  are  usually  conducted 
through  banks  and  persons  doing  banking  business. ' '  [See  also 
Supplement.] 

May  Take  Stocks  as  Security  For  or  in  Payment  of  Debts. 

— But  while  the  National  banks  are  impliedly  prohibited  from 
dealing  in  stocks,  they  may  yet  accept  stock  when  it  is  transferred 
to  them,  bona  fide,  in  satisfaction  or  payment,  or  by  way  of  com- 
promise of  debts  due  to  or  from  the  bank,  and  when  it  is  taken 
with  a  view  to  its  subsequent  sale  or  conversion  into  money  so  as  to 
make  good  or  reduce  an  anticipated  loss.  This  right  grows  out  of 
the  implied  power  to  adopt  reasonable  and  appropriate  measures 
to  secure  the  bank's  own  obligations,  or  collect  or  secure  debts  due 
to  it ;  and  in  this  behalf  the  bank  may  do  whatever  natural  per- 
sons would  do  under  similar  circumstances.  (First  National  Bank 
of  Charleston  v.  National  Exchange  Bank,  92  U.  S.,  122.)  And, 
in  such  a  case,  if  the  stock  is  worth  more  than  the  amount  of  the 
claim,  the  bank  may  pay  the  difference.     (/<^-) 

Purchasing  Commercial  Paper. — It  has  been  held  by  the 
highest  courts  of  Maryland  (Lazear  v.  National  Union  Bank  of 
Baltimore,  53  Md..  78)  and  Minnesota  (First  National  Bank  of 
Rochester  v.  Pierson,  24  Minn.,  140)  that  a  National  bank  has  no 


II 

power  io  purchase  commercial  paper,  or  acquire  any  title  to  such 
paper  by  a  purchase,  made  admittedl}'  not  in  the  way  of  discount, 
or  by  lending  money  on  the  credit  of  it.  In  the  Maryland  case  it 
was  said:  "  We  are  of  opinion  that  this  transaction  was  an  out- 
and-out  purchase  by  the  bank,  and  that  such  purchase  was  with- 
out authority,  and  that  the  bank  acquired  no  title  to  the  note,  and 
can  not  recover  thereon  in  this  suit.  While  we  do  not  mean  to  say 
that  a  National  bank  may  not  invest  its  surplus  capital  in  notes, 
we  are  of  opinion  that  it  has  no  authority  to  use  such  surplus 
funds,  as  may  remain  on  hand  from  day  to  day,  for  the  purpose  or 
buying  notes."  The  contrary  has  been  held  by  the  Supreme 
Court  of  Ohio  (Smith  v.  Exchange  National  Bank  of  Pittsburgh, 
26  Ohio  St.,  141),  though  it  was  said  by  that  court  that,  as  "  in 
the  business  of  banking,  the  purchasing  and  discounting  of  paper 
is  only  '  a  mode  of  loaning  money,'  "  the  purchase  could  not  be  at 
a  greater  rate  of  discount  than  allowed  by  the  usury  laws.  This 
view  seems  to  be  much  preferable  to  that  taken  in  the  Maryland 
and  Minnesota  cases,  in  which  the  construction  placed  upon  the 
law  appears  to  be  very  narrow. 

We  have  seen  that  a  National  bank  has,  in  general,  such  powers 
as  are  incident  to  the  banking  business,  and  the  purchase  and  sale 
of  commerial  paper  is  such  an  incident.  (Yerkes  v.  National  Bank 
of  Port  Jervis,  69  N.  Y.,  3S2.)  And  it  may  be  .said,  upon  good 
authority,  that  the  word  ''discount,'"  when  properly  interpreted, 
includes  a  pjirchase  as  well  as  a  loan.  In  Atlantic  vState  Bank  v. 
Savery  (82  N.  Y.,  291),  the" Court  of  Appeals  of  New  York,  in 
considering  the  question  whether  a  bank  organized  under  the  New 
York  banking  law  of  183S  could  purchase  a  note,  cite,  with  ap- 
proval from  Mclvcod  on  Banking,  that  "it  is  usual  to  estimate  the 
value  of  money  by  the  discount  or  profit  it  yields,  and  to  buy  or 
purchase  a  debt  is  always  in  commerce  termed  to  discount  it ;"  and 
from  the  case  of  Tracey  v.  Talmage  (18  Barb.,  456)  that  "to  di.s- 
count  includes  to  buy,  for  discounting,  at  most,  is  but  another  term 
for  buying  at  a  discount. ' '  And  the  same  meaning  has  been  ascribed 
to  the  term  by  other  courts.  (Niagara  County  Bank  v.  Baker,  15 
Ohio  St.,  85  ;  Pape  v.  Capital  Bank  of  Topeka,  20  Kau--^.,  440.) 

In  the  Maryland  case  cited  it  was  held  that  the  bank  could  not 
maintain  an  action  on  paper  which  it  had  acquired  by  purcha.se ; 
but,  in  later  cases  in  other  States,  it  has  been  held  that  notwith- 
standing the  bank,  in  purchasing  the  paper,  was  acting  in  excess 
of  its  power,  still  its  want  of  power  in  that  respect  could  not  be  set 


12 

Up  by  any  of  the  parties  to  the  paper  when  sued  thereon,  and  that 
it  is  only  for  the  Government  to  complain  that  the  bank  had  ex- 
ceeded its  authority.  (Prescott  National  Bank  v.  Butler,  157 
Mass.,  548;  Merchants'  National  Bank  v.  Hanson,  33  Minn,,  40; 
First  National  Bank  of  Pierre  v.  Smith,  8  S.  Dakota,  7.)  The 
latter  is,  no  doubt,  the  correct  view,  and  is  supported  by  the 
decisions  of  the  United  States  Supreme  Court  in  analogous 
cases.  (National  Bank  v.  Matthews,  98  U.  S.,  621  ;  National 
Bank  v.  Whitney,  103  U.  S.,  99  ;  Reynolds  v.  Crawfordsville  Bank, 
112  U.  S.,  405;  Thompson  v.  St.  Nicholas  National  Bank,  146 
U.  S.,  240.) 

And  even  if  a  National  bank  does  not  get  the  legal  title  to  a 
promissory  note  bought  in  the  market,  it  may  maintain  a  suit  as 
the  holder  thereof  (Prescott  National  Bank  of  Lowell  v.  Butler, 
supra.')  In  the  Kentucky  case  above  cited  it  was  held  that  the 
purchase  of  a  note  from  the  payee  with  the  latter's  endorsement, 
is  a  purchase  by  discounting  in  the  usual  course  of  business,  and 
is  not  a  purchase  by  barter  and  sale,  as  would  be  the  case  if  the 
note  were  taken  without  endorsement,  or  by  endorsement  without 
recourse.  So,  in  a  late  case  in  Missouri  it  was  decided  that  the 
receiving  of  notes  and  carrying  them  through  the  bank  books  as 
discounted  paper,  and  placing  the  face  value  as  the  proceeds  thereof 
te  the  ci'edit  as  cash  of  the  party  from  whom  they  were  received, 
constituted  a  discounting  or  negotiating  of  notes  within  the  law, 
although  the  interest  was  not  taken  in  advance  and  no  money  was 
actually  paid  on  them  at  the  time.  *  (EHerbee  v.  National  Ex- 
change Bank,  107  Mo.,  445.) 

Dealing  in  Checks. — Dealing  in  checks  is  a  part  of  the  usual 
business  of  banking,  and  would  be  within  the  general  powers  of  a 
bank  without  special  mention.  And  there  is  no  difference  in  this 
respect  between  checks  payable  to  bearer  and  those  paj^able  to 
order.     (First  National  Bank  of  Rochester  v.  Harris,  loS  Mass., 

514-) 

Lending  Credit— Accommodation  Paper.  —A  National  bank 
has  no  authority  to  lend  its  credit,  and  its  accommodation  paper 
or  indorsement  or  guaranty  will  be  void  in  the  hands  of  any  person 
taking  the  same  with  knowledge  of  the  facts.  (National  Bank  of 
Commerce  v.  Atkinson,  55  Fed.  Rep.,  465;  Seligman  v-  Char- 
lottesville National  Bank,  3  Hughes,  647 ;  Johnson  v.  the  same,  3 


13 

Hughes,  657.)     This,  it  may  be  remarked,  is  true  of  all  corpora- 
tions, and  the  principle  is  well  established  in  corporation  law. 

Accommodation  Guaranty.     [See  Supplement,] 

But  while  a  National  bank  may  not  lend  its  credit  for  the  accom- 
modation of  others,  still  it  may  guaranty  the  payment  of  commer- 
cial paper  as  incidental  to  the  exercise  of  its  power  to  buy  and  sell 
the  same.     (Thomas  v.  City  National  Bank  of  Hastings,  40  Neb. , 

50I-) 

A,  being  indebted  ''^  a  National  bank,  and  being  the  holder  of 
certain  negotiable  notes,  indorsed  them  generally,  and  delivered 
them  to  the  president  of  the  bank,  who  negotiated  them  for  value 
to  C,  at  the  same  time  executing  in  the  name  of  the  bank  a  written 
guaranty  of  payment.  From  the  proceeds  of  the  sale,  A's  debt  to 
the  bank  was  cancelled.  Held,  first,  that  the  guaranteeing  of  the 
notes  under  such  circumstances  was  within  the  powers  of  the 
bank ;  second,  that  the  authority  of  the  president  to  execute  the 
guaranty  would  be  conclusively  presumed  in  favor  of  the  pur- 
chaser acting  without  notice  to  the  contrary ;  third,  that  the  reten- 
tion and  enjoyment  by  the  bank  of  the  proceeds  of  such  transaction 
constituted  a  ratification  of  the  president's  act.  (/<^.)  Thus  the 
cashier  has  no  authority  to  bind  the  bank  by  a  guaranty  of  a 
mortgage  bond.  (Farmers'  and  Merchants'  National  Bank  v. 
Smith,  40  U.  S.  App.,  690.) 

The  ofl&cers  and  directors  of  a  National  bank  have  no  authority 
to  bind  the  bank  by  a  guaranty  of  the  debts  of  a  third  person  con- 
tracted for  his  own  benefit.  (Commercial  National  Bank  v.  Pirie, 
27  C.  C.  A,,  171 ;   82  Fed.  Rep.,  799.) 

Rediscounts. — A  rediscount  by  a  National  Bank  of  its  bills 
receivable,  though  it  endorses  the  same,  and  becomes  contingently 
liable  for  their  payment,  is  not  a  borrowing  of  money  by  the  bank, 
but  has  some  of  the  characteristics  of  a  sale.*  (United  States, 
National  Bank  v.  First  National  Bank  of  Little  Rock,  79  Fed. 
Rep. ,  296.)  And  such  a  transaction  is  not  so  far  outside  the  scope 
of  ordinary  banking  transactions  as  to  impo.se  upon  tiie  bank  buy- 
ing such  paper  the  duty  of  ascertaining  that  the  act  has  been 
specially  authorized  by  the  board  of  directors.  (/<^.)  And  when 
a  bank  has  long  been  in  the  habit  of  rediscounting  its  bills  receiv- 
able in  large  amounts,  all  other  banks  in  the  same  locality  pursu- 
ing the  same  practice,  and  the  president  and  cashier  of  such  bank 
proposes  to  its  regular  correspondent  a  rediscount  of  such  bills, 

•  But  the  Comptroller  requires  that  they  be  included  uuder  the  head  of  money  borrowed 
in  the  reports  of  condition  ;  and  the  principles  of  sound  banking  seem  to  demand  thnt  they 
be  thus  considered. 


14 

and  there  are  no  circumstances  attending  such  proposition  to 
arouse  suspicion,  the  bank  to  which  it  is  made  may  safely  act  upon 
it,  without  further  inquiry,  on  the  assumption  that  the  act  has 
either  been  specially  authorized,  or  that  the  officers  are  acting 
within  the  purview  of  their  powers.  (^Id.)  The  rule  announced 
in  Western  National  Bank  v.  Armstrong  (152  U.  S.,  346;  that  the 
vice-president  or  cashier  of  a  National  Bank  has  no  power  to  bor- 
row money  on  its  behalf  unless  specially  authorized  by  the  direc- 
tors, is  not  applicable  in  a  case  where  a  general  and  long-established 
usage  is  shown  between  correspondent  banks,  prevailing  in  both 
cities  where  the  lending  and  borrowing  banks  were  respectively 
situated,  that  loaning  and  borrowing  money  through  the  executive 
officers  of  the  bank,  no  further  authority  be  furnished  or  demanded  ; 
the  presumption  being  that  such  usage  was  condoned  and  acqui- 
esced in  by  the  directors  of  the  borrowing  bank,  in  the  absence  of 
notice  to  the  contrary  to  its  correspondent.  (Armstrong  v.  Chemi- 
cal National  Bank,  83  Fed.  Rep.,  556.) 

Assigning  Judgment. — When  a  judgment  belonging  to  a  Na- 
tional bank  is  transferred  without  collecting  it,  the  presumption  is 
that  the  transfer  is  unauthorized.     (Cox   v.    Robinson,   70   Fed. 

Rep.,  760.) 

Engaging  in  Manufacturing  Business. — [See  Supplement.] 

Borrowing  of  Money. — The  power  to  borrow  monej'' or  to  give 
notes  is  not  expressly  conferred  by  the  act ;  but  in  proper  cases  a 
bank  may  become  a  temporary  borrower  of  money.  (Western 
National  Bank  z'.  Armstrong,  152  U.  S.,  346;  Chemical  National 
Bank  v.  Armstrong,  65  Fed.  Rep.,  573.) 

But  such  transactions  are  so  much  outside  of  the  general  scope 
of  the  bank's  business,  that  the  officer  acting  for  the  bank  therein 
must  have  special  authority.  {Id.)  The  vice-president,  even 
though  he  is  the  principal  executive  officer  of  the  bank,  has  no 
implied  authority  to  borrow  large  sums  on  time.  {Id.')  And 
where  an  officer  without  authoritj'  borrows  money  for  the  bank, 
the  mere  fact  that  tlie  money  was  placed  to  the  credit  of  the  bank 
involves  no  ratification  of  his  act,  unless  the  money  was  so  placed 
with  the  bank's  consent;  and  the  withdrawal  of  the  money  by 
drafts  drawn  by  such  officer  in  the  name  of  the  bank  will  not  con- 
stitute a  receipt  of  such  money  by  the  bank,  unless  it  was,  in  point 
of  fact,  received  and  used  by  the  bank,  or  for  its  benefit.     {Id.) 


15 

Assuming  Obligations  of  Other  Bank.  —  A  National 
bank  has  power  to  make  a  contract  whereby,  in  consideration  of 
the  transfer  to  it  of  the  ofl5ce  furniture,  lease  and  cash  assets  of 
another  National  bank,  it  will  assume  and  pay  the  liabilities  of 
such  other  bank.  (Schofield  v.  State  National  Bank,  97  Fed. 
Rep.^  282.) 

Contract  to  Pay  for  the  Procuring  of  Customer. — In  the 
late  case  of  Dresser  v.  Traders'  National  Bank  (165  Mass.  120),  it 
was  held  by  the  Supreme  Court  of  Massachusetts  that  a  National 
bank  is  not  authorized  to  make  a  contract  to  furnish  fire  insurance 
to  a  person  in  consideration  of  his  procuring  a  customer  for  the 
bank ;  and  it  was  doubted  whether  the  bank  can  agree  to  pay 
money  for  such  a  purpose.  The  court  said :  ' '  Two  questions  are 
then  presented  :  First,  whether  a  bank  can  agree  to  pay  money  to 
a  third  person  for  the  purpose  of  securing  a  customer ;  and,  second, 
if  it  can  do  so,  whether  it  can  agree  to  furnish  to  such  third  per- 
son for  such  a  purpose  fire  insurance  to  a  specific  amount.  We 
should  be  slow  in  answering  the  first  question  in  the  afiirmative. 
Such  a  mode  of  doing  business  is  so  inconsistent  with  sound  prin- 
ciples of  banking  that  it  would  seem  that  the  directors  would  not 
be  justified  in  thus  spending  the  money  of  the  stockholders.  But 
it  is  unnecessary  to  decide  this  question,  as  we  are  of  opinion 
that  the  second  question  must  be  answered  in  the  negative.  As 
we  understand  the  declaration,  the  ofiicers  of  the  bank,  acting  in 
its  behalf,  were  to  go  about,  either  personally  or  by  an  agent, 
seeking  for  persons  who  wished  to  insure  their  property,  and 
when  they  had  found  them,  put  the  matter  in  the  hands  of  the 
plaintiff  who  would  cause  insurance  to  be  made,  and  thus  earn  a 
commission.  We  are  of  opinion  that  this  would  be  so  far  outside 
the  legitimate  purposes  for  which  National  banks  are  organized 
that  the  contract  declared  on  must  be  deemed  to  be  ulira  vires  of 
the  defendant  corporation." 

False  Representations. — A  National  bank  may  be  held  liable 
for  damages  for  a  false  representation  made  by  its  cashier  as  to 
credit  of  a  customer  seeking  credit  at  another  bank.  (Nevada 
Bank  of  San  Francisco  v.  Portland  National  Bank,  59  Fed.  Rep. 
338.) 

Donation  of  Funds. --Where  the  president  of  a  National  bank 
signed  its  name  to  a  subscription  paper  obligating  the  bank  to 
donate  $200  to  certain  parties  on  condition  that  they  would  erect 


i6 

a  paper-mill  in  the  city  of  K: — Held,  (i)  that  the  making  of  dona- 
tions of  its  funds  to  aid  in  the  building  of  a  paper-mill  was  no 
part  of  the  business  for  which  the  bank  was  incorporated ;  (2; 
that  the  act  of  the  president  was  not  within  the  scope  of  his  au- 
thority, and  that  the  bank,  in  the  absence  of  an  authorization  or 
ratification  by  it  of  the  president's  act,  was  not  bound  by  the 
agreement  made.  (Robertson  zk  Buffalo  County  National  Bank, 
40  Neb.  235.) 

Employment  of  Attorneys. — Under  the  fourth  subdivision  of 
section  5136  a  National  bank  has  full  power  to  employ  attorneys 
to  bring  or  defend  suits  in  any  court  of  law  or  equity  ;  and  such 
employment,  including  the  agreement  for  compensation,  may  be 
made  by  the  president  of  such  bank.  Such  employment  by  the 
president  is  a  sufficient  authorization  and  employment,  and  the 
bank  will  be  bound  thereby.  The  power  to  complain  and  defend 
is  not  limited  to  suits  in  which  the  bank  may  be  successful ;  nor 
is  the  right  of  the  attorney  to  recover  limited  by  the  character  of 
the  questions  which  may  arise  in  the  case.  (National  Bank  of 
Guthrie  v.  Earl,  2  Okl.  617  ;  see  also  Citizens'  National  Bank  of 
Kingman  v.  Berry,  53  Kans.  696.) 

Promise  to  Pay  Draft. — An  officer  of  a  National  bank  has  no 
power  to  bind  it  to  pay  the  draft  of  a  third  person  on  one  of  its 
customers  to  be  drawn  at  a  future  day,  w4ien  it  expects  to  have  a 
deposit  from  him  sufficient  to  cover  it,  and  no  action  lies  against 
the  bank  for  its  refusal  to  pay  such  a  draft.  (Flannagan  ef  al.  v. 
California  National  Bank  et  al.,  56  Fed.  Rep.,  959.) 

Loans  to  Officers. — A  National  bank  may  make  loans  to  its 
officers  and  directors  as  freely  as  to  other  persons.  (Blair  v.  First 
National  Bank  of  Mansfield,  10  Chicago  Legal  News,  84 ;  2  Nat. 
Bank  Cor.,  173.)  But  the  loans  must  be  honest,  and  the  borrow- 
ers must  not  participate  in  making  the  loans  to  themselves.     {Id.') 

Officers — Tenure  of  Office. — The  officers  of  a  National  Bank 
must  be  regarded  as  having  taken  and  accepted  their  positions 
under  the  terms  of  the  act,  and  to  hold  them  by  the  tenure  speci- 
fied, to  wit,  the  pleasure  of  the  board  of  directors.  (Harrington 
7>.  First  National  Bank  of  Chittenango,  i  Thompson  &  Cook  (N. 
Y.),  361.)     It  was  intimated   in   the  case  cited  that  the  officers 


17 

could  not  be  hired  for  a  specified  time ;  and  it  lias  since  been  held 
that  the  cashier  of  a  National  bank  can  not  be  chosen  for  any 
stated  term,  but  holds  his  office  at  the  pleasure  of  the  board 
of  directors.  (Westervelt  v.  Mohrenstecher,  40  U-  S.  App.,  221.) 
And  a  bj'-law  which  provides  that  he  shall  hold  his  office  for  a 
stated  term,  as  for  instance,  for  one  year,  is  void.     (Id.) 

Lending  for  Customers. — A  National  bank  is  not  authorized 
to  engage  in  the  business  of  lending  money  for  its  customers ;  and 
it  can  not  be  held  liable  for  the  acts  of  its  officers  in  so  doing. 
(Grow  7'.  Cockrill,  63  Ark.,  418.) 

Liens, — There  is  nothing  in  the  National  Banking  Law  which 
forbids  a  National  bank  selling  seed  grain  on  credit,  to  acquire  the 
lien  afforded  by  the  State  statute.  (First  National  Bank  of  Parker 
V  Peavey  Elevator  Company  (S.  D.)  72  U-  W.  Rep.,  402.)  But  even 
were  such  a  transaction  forbidden,  only  the  Government  could  be 
heard  to  complain,     (/d.) 

Selling  Mortgages. — A  National  bank  has  no  power  to  act  as 
a  broker  in  selling  farm  mortgages  for  a  commission.  (Farmers 
and  Merchants'  National  Bank  v.  Smith,  40  U.  S.  App.,  690.) 

Collections. — The  cashier  of  a  National  bank  has  authority  on 
behalf  of  the  bank  to  make  a  collection  from  a  Savings  bank. 
(Hanson  v.  Heard,  38  Atl.  Rep.,  788.)  The  fact  that  receipts 
appear  upon  their  face  to  be  the  personal  receipts  of  the  cashier 
does  not  preclude  the  depositor  from  showing  that  they  were 
intended  and  understood  to  be  receipts  in  his  capacity  as  cashier 
of  the  bank.     (Id.) 

Bonds  of  Officers. — The  directors  are  vested  with  a  sound 
discretion  as  to  whether  or  not  bonds  shall  be  given  by  the  officers 
of  the  bank.  (Robinson  2'.  Hill,  63  Fed.  Rep.,  522.)  But  special 
circumstances  may  exist  which  will  require  them  to  do  so.  (-^d.) 
It  is  not  necessar)^  that  the  acceptance  of  the  bond  should  be  sig- 
nified by  memoranda  entered  upon  the  journal  or  minutes  of  the 
directors.  The  acceptance  is  to  be  presumed  from  the  retention 
of  the  bond,  and  from  the  fact  that  the  officer  is  permitted  to  enter 
upon  or  continue  in  the  discharge  of  his  duties.  (Graves  z'.  The 
Lebanon  National  Bank,  10  Bush.,  23.) 
2 


i8 

A  surety  on  the  bond  of  a  cashier  of  a  National  bank  is  not  dis- 
charged by  the  fact  that,  before  the  bond  was  given,  the  cashier  had 
committed  frauds  upon  the  bank,  if  such  frauds  were  unknown  to 
the  officers  of  the  bank,  although  they  were  guilty  of  gross  negli- 
gence in  not  discovering  them.    (Tapley  v.  Martin,  ii6  Mass.,  275.) 

Ultra  Vires. — It  is  a  well-established  principle  that  after  a  con- 
tract entered  into  by  a  corporation  has  been  performed  by  either  of 
the  contracting  parties,  the  fact  that  the  making  of  the  contract 
involved  an  unauthorized  exercise  of  corporate  power  on  the  part  of 
the  company  will  not  constitute  a  defense  to  an  action  brought  by 
the  party  having  performed  the  contract,  to  recover  compensation 
for  a  breach  of  the  contract  by  the  other  party.  This  principle  has 
been  applied  to  the  contracts  of  National  banks  in  numerous  cases. 
Thus,  where  bonds  were  sold  to  a  National  bank  under  a  contract 
b)^  which  it  agreed  to  replace  tbe  bonds  to  a  seller  at  the  same 
price,  or  less,  it  was  held  that,  admitting  the  contract  to  be  one  the 
bank  could  not  legally  make,  yet  it  could  not  hold  the  bonds  under  or 
bj'  virtue  of  the  contract,  and  at  the  same  time  refuse  to  comply  with 
the  terms  of  purchase.  (I^ogan  County  Bank  v.  Townsend,  139  U.S., 
67.)  So,  even  if  a  National  bank  has  not  authority  to  picrchase  com- 
mercial paper,  this  can  not  be  set  up  as  a  defence  by  the  person  liable 
on  the  paper  when  sued  by  the  bank  thereon.  (Prescott  National 
Bank  v.  Butler,  157  Mass. ,  548-)  So,  where  a  National  bank  has  made 
a  loan  upon  a  real  estate  mortgage,  its  want  of  power  to  take  such 
a  security  is  not  a  defense  to  the  mortgagee  in  a  suit  by  the  bank 
to  foreclose  the* mortgage.  (National  Bank  v.  Matthews,  98  U  S., 
621.)  So,  in  an  action  to  determine  an  adverse  claim  to  real  estate, 
which  had  been  sold  under  a  judgment,  and  bid  in  by  the  judg- 
ment creditor,  and  the  certificate  of  sale  assigned  to  a  National 
bank,  it  was  held  that  the  defendants  could  not  raise  the  question 
that  the  bank  had  no  authority  to  purchase  the  certificate.  (Hen- 
nessey 7'.  City  of  St.  Paul,  54  Minn.,  219.)  And  so,  in  an  action  by 
a  National  bank  on  railroad  aid  bonds,  the  obligor  cannot  set  up  as 
a  defense  that  the  purchase  of  the  bonds  by  the  bank  was  ultra 
"oires.  (Town  Council  of  Lexington  v.  Union  National  Bank,  22 
Sou.  Rep.,  291.)  Conversely,  where  a  National  bank  has  received 
and  retained  the  benefit  of  a  contract  made  by  its  officers,  it  can  not 
plead  that  the  contract  was  unauthorized  by  the  directors,  or  be- 
yond the  power  of  the  bank  or  its  officers  to  make.  (Tootle  v-  First 
National  Bank  of  Port  x\ngeles,  6  Wash.,  181.)     Thus,  it  can  not 


19 

intei  pose  the  defeuse  of  ultra  vires  to  a  contract  made  by  it  to  secure 
the  free  entrance  of  light  and  air  into  its  banking  house,  where  it 
has  enjoyed  the  benefits  of  the  contract.  (Trustees  of  First  Pres- 
byterian Church  V.  National  State  Bank,  57  N.  J.  lyaws,  27.)  And 
ah  agreement  to  indemnify  a  surety  upon  an  attachment  bond  is 
enforcible  against  a  National  bank,  where  the  surety  has  paid  the 
bond,  though  the  bond  was  not  given  for  the  benefit  of  the  bank. 
(Seeber  z;.  Commercial  National  Bank  of  Ogden,  77  Fed.  Rep.,  957.) 
The  fact  that  the  act  of  a  N^ional  bank  in  assuming  to  repre- 
sent another  as  agent  is  ultra  vires  will  not  exempt  it  from  the 
rules  of  law  which  regulate  the  duties  of  an  agent  to  his  principal. 
It  cannot  plead  its  own  violation  of  law  to  justify  a  breach  of 
trust.  Accordingly,  when  a  National  bank  which  had  assumed 
to  sell  for  another  certain  notes  owned  by  him,  but  had,  instead  of 
so  selling  them  to  a  third  person,  without  his  knowledge,  sold  thetn 
to  itself,  it  was  held  that  the  bank  had  violated  its  duty  to  the 
owner,  the  same  as  if  it  had  full  power  under  the  law  to  act  as  such 
agent ;  and  was,  therefore,  guilt}'^  of  a  conversion  of  such  notes. 

(Anderson  v.  F'irst  National  Bank  of  Grand  Forks,  67  N.  W.  Rep., 

821.)     [See  also  Supplement.] 

Where  a  National  bank  has  purchased  stock  in  another  corpo- 
ra-tion,  out  of  the  ordinary  course  of  its  banking  business,  and  not 
as  security  for  a  debt  previously  contracted,  it  may  plead  that  such 
act  was  ultra  vires,  as  a  defense  in  an  action  against  it  as  a  stock- 
holder of  such  corporation.  (The  California  National  Bank  v. 
Kennedy,  167  U.  S.  362,  overruling  Kennedy  v.  California  Savings 
Bank,  loi  Cal.,  495.) 

16.    Limitations  as  to  Real  Estate  and  Mortgages. 

Section  5137. — A  National  banking  association  may  purchase,  hold,  and 
convey  real  estate  for  the  following  purposes,  and  for  no  others : 

First.  Such  as  shall  be  necessary  for  its  immediate  accommodation  in  the 
transaction  of  its  business. 

Second.  Such  as  shall  be  mortgaged  to  it  in  good  faith  byway  of  security 
for'debts  previously  contracted. 

Third.  Such  as  shall  be  conveyed  to  it  in  satisfaction  of  debts  previously 
contracted  in  the  course  of  its  dealings. 

Fourth.  Such  as  it  shall  purchase  at  sales  under  judgments,  decrees,  or 
mortgages  held  by  the  association,  or  shall  purchase  to  secure  debts  due  to  it. 

But  no  such  association  shall  hold  the  possession  of  any  real  estate  under 
mortgage,  or  the  title  and  possession  of  any  real  estate  purchased  to  secure 
any  debts  due  to  it,  for  a  longer  period  than  five  years. 


20 

Purchases  and  Conveyances.  — In  purchasing  or  conveying 
real  estate  a  National  bank  should  act  through  its  president  or 
cashier,  duly  authorized  by  regular  resolution  of  its  board  of 
directors. 

Banking-House. — Ma}^,  perhaps,  include  portions  of  building 
built  chiefly  for  its  own  use,  which  the  bank  rents  to  others ;  but 
it  is  a  question  how  far  a  National  bank  can  purchase  or  improve 
real  estate  under  color  of  erecting  a  banking-house, 

A  National  bank  which  has  not  been  authorized  by  the  certifi- 
cate of  the  Comptroller  of  the  Currency  to  commence  the  business 
of  banking,  has  no  power  to  execute  a  lease  of  a  banking  house 
for  a  term  of  years.  (McCormick  v.  Market  National  Bank  of 
Chicago,  165  U.  S.,  538;  S.  C,  162  111.,  100.) 

When  Real  Estate  Security  May  Be  Taken. — The  authority 
conferred  by  the  second,  third  and  fourth  subdivisions  of  this  sec- 
tion is  necessary  to  enable  the  bank  to  collect  the  debts  due  to  it, 
and  is  such  authority  as  is  conferred  in  nearly  all  grants  of  cor- 
porate power.  But,  in  order  that  the  bank  may  acquire  any  inter- 
est in  real  estate,  or  any  mortgage  or  lien  thereon,  under  these 
subdivisions,  it  is  essential  that  there  should  have  been  a  debt 
previously  contracted  in  good  faith.  There  is  no  authority  granted 
to  deal  in  real  estate,  or  to  take  real  estate  or  any  mortgage  or  lien 
thereon,  as  security  for  contemporaneous  loans.  Thus,  if  a  bank 
has  discounted  a  note  upon  the  faith  of  the  paper  itself,  and  the 
paper  is  not  paid  at  maturit)^,  or  if  before  it  matures,  the  maker,  or 
the  person  who  negotiated  it,  becomes  embarrassed,  then  the  bank, 
acting  bona  fide,  would  have  the  right  to  take  a  mortgage  or  con- 
veyance of  real  estate  as  security  for,  or  in  satisfaction  of,  the  debt; 
but  it  would  have  no  right  to  take  a  mortgage  to  secure  a  note  dis- 
counted at  the  same  time,  or  to  secure  paper  to  be  discounted 
thereafter,  or  to  enter  into  an  agreement  at  the  time  of  making  the 
discount  that  it  will  take  a  conveyance  of  real  estate  in  payment 
or  satisfaction  of  the  note.  These  principles  are  now  settled  be- 
yond controvers^^  (Bank  v.  Matthews,  98  U.  S.,  621  ;  Fowler  v. 
Scully,  72  Pa.  St.,  451  ;  Crocker  v.  Whitney,  71  N.  Y.,  161 ;  Frid- 
ley  V.  Bowen,  87  111.,  151.) 

As  Security  for  Debts  Previously  Contracted. — The  National 
banks  ma^^  take  mortgages  on  real  estate  to  secure  the  payment  of 
debts  previou.sly  contracted.    (First  N.  B.  of  Skowhegan  v.  Max- 


21 

field,  83  Me.,  576.)  And  the  power  of  the  National  banks  to  sec«ire 
or  satisfy  tlieir  debts  out  of  real  estate  is  ample  for  the  purpose, 
aud,  in  the  bo7ia  fide  exercise  of  their  power  iu  this  respect,  they 
may  do  whatever  an  individual  would  do  under  similar  circum- 
stances. If  the  real  object  of  the  purchase  i^  to  secure  or  satisfy 
debts,  the  authority  of  the  bank  to  purchase  is  not  limited  to  the 
exact  amount  of  the  debts,  but  it  is  entitled  to  purchase  such  real 
estate  as  may  be  necessary  for  the  purpose.  (Upton  v.  National 
Bank  of  South  Reading,  120  Mass.,  153.)  Accordingly,  it  has 
been  held  that,  when  the  inducement  to  the  transaction  is  the  se- 
ourity  of  an  antecedent  indebtedness,  the  bank  may  make  an  addi- 
tional advance,  and  take  a  mortgage  on  real  property  to  secure 
both  the  advance  and  the  prior  indebtedness.  { /c/.)  So  it  may  take 
a  conveyance  of  real  estate  worth  more  than  the  debt,  and  pay  the 
difference  between  the  debt  and  the  value  of  the  property.  (lyibby 
V.  Union  National  Bank,  99  111.,  622.)  And  similarly,  when  there 
is  a  prior  lien  upon  the  property,  the  bank  may  discharge  this  lien 
and  take  a  mortgage  to  cover  the  whole  amount  (Ornn  v.  Mer- 
chants' National  Bank,  16  Kans.,  34),  or  it  may  purchase  the  prior 
lien  and  enforce  it  in  its  own  behalf  (Holmes  v.  Boyd,  90  Ind., 
322)  And,  iu  taking  a  mortgage  to  secure  the  debt  upon  notes 
already  due,  it  is  not  a  violation  of  the  law  for  the  bank  to  agree 
to  renew  the  notes  and  hold  the  mortgage  as  security  for  the  re- 
newals. (Howard  National  Bank  z-.  Loomis,  51  Vt.,  349.)  Where 
a  bank  sells  real  estate  of  which  it  is  the  owner,  it  may  take  a 
mortgage  on  the  same  to  secure  payment  therefor.  ( New  Orleans 
National  Bank  v.  Raymond,  29  La.  Ann.,  355.) 

Debentures — Stock  of  Real  Estate  Companies — Wife's 
Separate  Estate. — Very  difficult  questions  frequently  arise  as 
to  whether  a  contemplated  transacticna  is  within  the  inhibition 
against  loans  on  real  estate.  One  question  of  frequent  occurrence, 
especially  in  the  West,  is  whether  the  debentures  of  mortgage 
lean  companies  can  be  taken  as  collateral.  This  point  has 
never  been  judicially  determined,  but  the  Comptrollers  of  the  Cur- 
rency have  generally  expressed  the  opinion  that  they  are  not 
proper  securities  for  a  National  bank  to  receive.  But  it  has  been 
held  by  the  Supreme  Court  of  Minnesota  that  a  National  bank  may 
make  loans  upon  the  securitj-  of  the  stock  of  a  corporation  who.se 
property  consists  .solely  of  real  estate.  (Baldwin  v.  State  National 
Bank,  26  Minn.,  43.)     Where  a  married  woman  indorsed  a  note: 


22 

"  I  hereby  charge  my  separate  and  personal  estate  for  the  payment 
of  the  within  note  "  it  was  held  by  the  Court  of  Appeals  of  New 
York  (Third  National  Bank  v.  Blake,  73  N.  Y.,  260 j  that  the  in- 
dorsement was  to  be  treated  as  personal  security,  within  the  mean- 
ing of  the  National  banking  law,  and  not  as  a  mortgage. 

Mortgage  Given  to  Indorser  to  Enure  to  Bank.— It  has 
been  held  that  a  National  bank  may  make  an  agreement  that,  in 
case  a  note  discounted  by  it  shall  not  be  paid,  a  mortgage  given 
by  the  maker  to  his  indorser  shall  enure  to  the  benefit  of  the  bank 
(Haire  v.  First  National  Bank,  36  Iowa) ;  but  this  decision  seems 
to  be  very  questionable. 

Promissory  Notes  Secured  by  Mortgage — ^Judgment  Notes. 
— The  Solicitor  of  the  Treasury,  in  an  opinion  given  to  the  Comp- 
troller of  the  Currency,  has  held  that  it  is  not  unlawful  for  a  National 
bank  to  lend  upon  a  promissory  note,  which  is  secured  by  bonds 
and  notes  which  are  in  turn  secured  by  real  estate,  nor  to  lend  on 
judgment  notes,  which  when  recorded  become  liens  on  real  estate; 
provided  such  loans  are  made  solely  on  personal  security  given.  * 

Violation  of  Law  Can  Not  Be  Set  Up  by  Borrower.— But 

while  a  National  bank  is  forbidden  to  make  loans  upon  real  estate 
security,  this  point  can  not  be  raised  against  the  bank  when  it 
seeks  to  foreclose  a  mortgage  or  othervidse  satisfy  the  debt  out  of  the 
property.  No  one  but  the  Government  can  be  heard  to  complain 
that  the  bank  has  exceeded  its  powers,  and  the  only  penalty  which 
it  incurs  is  a  liability  to  a  forfeiture  of  its  franchises.  (National 
Bank  v.  Matthews,  98  U.  S.,  621.)  And  where  the  bank  acquires 
real  estate,  which  it  had  no  authority  to  take,  the  conveyance  to 
it  is  not  void,  but  only  voidable,  at  the  option  of  the  Government ; 
and  its  title  to  such  property  is  good  until  assailed  in  a  direct  pro- 
ceeding brought  by  the  Government.  (Reynolds  v.  Crawfords- 
ville  Bank,  112  U.  S.,  405.)     [See  also  Supplement.] 

Policy  of  the  La^v. — The  prohibition  against  loans  on  real 
estate  is  a  feature  of  the  law  which  has  been  much  criticized  in 
some  quarters ;  and  as  evidence  that  this  restriction  upon  the 
powers  of  the  National  banks  is  unreasonable  and  unnecessary,  it 
is  urged  that  real  estate  is  the  best  kind  of  security ;  that  savings 
banks,  trust  companies,  and   insurance  companies  are  authorized 

*  The  Comptroller  of  the  Currency's  oflfice  formerly  accepted  this  opinion, 
but  now  holds  that  such  loans  are  not  lawful. 


23 

to  make  such  loans ;  and  why,  therefore,  should  not  the  National 
banks  be  permitted  to  do  the  same?  But,  by  the  great  majority  of 
bankers,  the  restriction  is  deemed  wise  and  salutary.  The  objec- 
tion to  real  estate  security  is  not  to  its  sufficiency,  but  to  the  kind. 
As  the  obligations  of  the  banks  are  largely  payable  on  demand,  it 
is  necessary  that  the  securities  it  holds  should  be  readily  converti- 
ble into  money ;  and  while  a  mortgage  upon  real  estate  may  be 
good  security,  it  can  not  be  made  immediately  available,  in  case  of 
an  emergency.  Personal  securities  of  the  kind  usually  taken  by 
banks  can  be  quickly  assigned,  and  promptly  realized  upon;  but 
the  transfer  of  any  interest  in  real  estate  is  always  attended  with 
more  or  less  delay.  It  has  not  infrequently  been  the  case  that 
banks  have  been  compelled  to  suspend  when  their  assests  were 
more  than  sufficient  to  pay  their  debts,  simply  because  a  large  por- 
tion of  the  assets  were  real  estate  securities,  upon  which  it  was 
impossible  to  realize  at  the  proper  time.  In  the  case  of  insurance 
companies,  trust  companies,  savings  banks,  and  similar  corpora- 
tions there  is  not  the  same  necessity  for  having  the  assets  in  a 
convertible  form,  but  it  is  rather  desirable  that  a  large  portion  of 
the  investments  shall  be  of  a  more  or  less  permanent  character ; 
and.  therefore,  real  estate  loans  are  well  adapted  to  their  purpose. 

17.    Minimum  Capital  Required. 

Section  5138.— No  association  shall  be  organized  under  this  Title  with  a 
less  capital  than  one  hundred  thousand  dollars;  except  that  banks  with  a 
capital  of  not  less  than  fifty  thousand  dollars  may,  with  the  approTal  of  the 
Secretary  of  the  Treasury,  be  organized  in  any  place  the  population  of  which 
does  not  exceed  six  thousand  inhabitants.  No  association  shall  be  organized 
in  a  city  the  population  of  which  exceeds  fifty  thousand  persons  with  a  less 
capital  than  two  hundred  thousand  dollars. 

This  section  Is  amended  by  Act  of  March  14th,  1900,  which  pro- 
vides for  the  organization  of  associations  with  $25,000  capital  in 
towns  of  3,000  population  or  less.  (See  the  Act,  page  311.)  The 
Comptroller  relies  principally  on  reports  of  commercial  agencies  iu 
determining  the  population  of  a  place,  but  his  findings  in  regard 
to  this  are  not  necessarily  final.  Any  error  of  his  in  this  respect 
can  be  ^jcorrected  in  appropriate  legal  proceedings.  It  some- 
times happens  that  we  find  banks  in  some  towns  and  cities 
that  appear  to  have  less  than  the  minimum  capital  re- 
quired   by    law.       The    explanation    is    that    they    were    either 


24 

organized  when  the  places  were  smaller,  or  were  organized  in 
villages  afterward  absorbed  by  cities  lying  near. 

When  application  is  made  to  the  Comptroller  for  a  bank  with 
$50,000  capital,  he  certifies  the  application,  with  statement  as  to 
population,  etc.,  to  the  Secretary  of  the  Treasury,  who  thereupon 
takes  action  and  approves  or  not  as  he  deems  best.  Generally 
there  is  no  objection,  but  the  Secretary  might  not  give  his  approval 
if  he  thought  a  bank  unnecessary,  or  if  there  was  a  bank  already 
in  the  place  giving  sufiBcient  banking  facilities. 


18.     Stockholders'  Rights  and  Liabilities. 

Section  5139. — The  capital  stock  of  each  association  shall  be  di'>ided  ir:to 
shares  of  one  hundred  dollars  each,  and  be  deemed  personal  property,  ar.d 
transferable  on  the  books  of  the  association  in  such  manner  as  may  be  pre 
scribed  in  the  by-laws  or  articles  of  association.  Every  person  becoming  a 
shareholder  by  such  transfer  shall,  in  proportion  to  his  shares,  succeed  to  alj 
the  rights  and  liabilities  of  the  prior  holder  of  such  shares ;  and  no  change 
shall  be  made  in  the  articles  of  association  by  which  the  rights,  remedies,  or 
security  of  the  existing  creditors  of  the  association  shall  be  impaired. 

Par  Value. — The  exception  to  the  division  into  shares  of  $100 
each  is  in  case  of  State  banks  converted.  (See  section  5154,  par. 
36.)  If  a  converted  bank  desires  to  change  the  denomination  of 
its  shares,  the  new  denomination  must  be  $100. 

State  Statutes. — It  is  not  competent  for  State  legislation  to 
limit  or  interfere  with  the  transferable  quality  of  National  bank 
stock,  as  the  same  is  left  by  the  statutes  of  the  United  States. 
(Doty  V.  First  National  Bank  of  Lariraore,  3  N.  D.,  9.) 

But  it  has  been  held  that  a  State  statute  prescribing  the  mode 
of  transfer  of  stock  by  executors  and  administrators  will  apply  to 
the  stock  of  a  National  bank  located  in  such  State.  (Hobbs  v. 
Western  National  Bank  (U.  S.  Ct.  Ct.),  2  Nat.  Bk.  Cas.,  187.) 

And  it  is  held  that  a  State  statute  which  provides  that  the  stock- 
holders of  all  private  corporations  shall  have  the  right  of  access  to 
and  inspection  and  examination  of  the  books,  records  and  papers 
of  the  corporation  at  all  reasonable  and  proper  times,  applies  to 
National  banks  located  within  the  State.  (Winter  v.  Baldwin,  89 
Ala.,  483.) 

And  National  bank  stock  is  subject  to  seizure  and  sale  on  exe- 
cution under  authority  of  State  laws.  {^In  ;r  Braden's  Estate,  165 
Pa.  St.,  1 84.) 


25 

Transfer   of  Stock — Entry   of    Transfer   on    Books. — The 

transfer  of  stock  in   National  banks  is  not   governed   by  diflercnt 
rules  from  those  which  are  ordinaril}'  applied  to  the  transfer  of 
stock  in  other  corporations.     (Johnson  v.  Lafiin,  103  U.  S-,  Soo.) 
The  entry  of  the  transaction  in  tiie  books  of  the  bank  is  required, 
not  for  the  purpose  of  passing  the  title  from  seller  to  buyer,  but 
for  the  protection  of  the  parties,  and  others  dealing  with  the  bank, 
and  to  enable  the  bank  to  know  who  are  its  .stockholders,     (/a^.) 
Accordingly,  it  has  been  held  by  the  Supreme  Court  of  the  United 
States  that  where  the  shareholder  delivers  his  certificates  of  stock 
to  the  purchaser,  with   a  Ijlank  power  of  attorney  to  make  the 
transfer  on   the  books  of  the  bank,  and  receives  the  purchase- 
money,  the  sale  is  complete  and  the  title  passes  from  seller  to 
buyer,     itd.')     And  so  it  has  been  decided  that  where  a  share- 
holder who  has  sold  his  stock  delivers  the  certificates  with  a  pro- 
per power  of  attorney  to  the  cashier  with  a  request  that  the  transfer 
be  made   upon  the  books,  and  the  cashier  promises  so  to  do,  the 
transferror  has  done  all  that  is  legally  required  of  him  to  divest 
himself  of  the  liability  of  a  stockholder,  and  should  the  cashier 
fail  to  make  the  transfer  on  the  books,  the  transferror  can  not  be 
held  as  a  stockholder  in  case  the  bank  should  afterwards  become 
insolvent.     (Hayes  v.  Shoemaker,  39  Fed.  Rep.,   319  ;  Young  v. 
McKay,  50   Fed.    Rep.,  397.)     And  it  is   further  held  that  it  is 
wholly  unimportant  in  such  case  whether  the  notice  of  sale  and 
request  to  transfer  are  in  writing  or  oral.     (Hayes  v.  Shoemaker, 
39  Fed.  Rep.,  319)    When  a  certificate  of  stock  is  left  with  the  of- 
ficers of  the  bank  to  be  transferred  on  the  books,  the  transfer  takes 
place  at  the  time  when  it   is  so  left,  and  not  at  the  time  of  actual 
entry  in  the  books,  provided  the  party  leaving  it  has  authenticated 
to  the  ofi&cers  of  the  bank  his  intention  to  make  such  transfer  in 
the  manner  prescribed  by  the  by-laws  of  the  bank.     (Young  v. 
McKay,  50  Fed.  Rep.,  394)    The  rights  of  a  transferee  of  National 
bank  stock,  under  an  unrecorded  transfer,  good  at  common  law, 
are  superior  to  the  rights  of  a  subsequent  attaching  creditor  of  the 
transferror  without  notice.     (Doty  v.  First  National  Bank  of  Lari- 
more,  3  N.  D.,  9. 

But  while  the  noting  of  the  transfer  on  the  books  is  not  neces- 
sary for  the  purpose  of  passing  the  title  to  the  stock,  it  is  essential 
for  other  purposes.  It  is  important  to  the  transferee  that  the  trans- 
fer should  be  properly  registered,  for,  until  this  is  done,  the  corpo- 
ration is  not  bound  to  recognize  him  as  a  stockholder,  and  he  is 


26 

not  entitled  to  vote  upon  the  stock,  or  to  receive  the  dividends 
thereon,  or  in  fact,  to  have  any  of  the  privileges  of  a  stockholder; 
and  the  transferror  has  an  interest  in  having  the  transfer  registered, 
because  he  will  not  be  discharged  from  his  liability  as  a  stock- 
holder until  this  is  done.  (Bowdell  v.  Farmers'  and  Merchants' 
National  Bank,  Brown's  National  Bank  Cases,  147.) 

The  record  made  of  the  transfer  upon  the  books  of  the  bank  is 
suf&cient,  as  between  the  transferee  and  the  bank,  to  work  a 
change  of  ownership,  and  new  certificates  are  not  necessary  to  his 
becoming  the  owner  of  the  stock  so  transferred.    (Keyser  v.  Hitz^ 

133  U.S.,  438.) 

Subscription  to  stock  and  payment  in  full  and  entry  of  his  name 
on  the  books  as  a  stockholder  makes  the  subscriber  a  shareholder 
without  taking  out  a  certificate.  (Pacific  National  Bank  v.  Eaton, 
141  U.  S.,  227  ;  Thayer  v.  Butler,  lb.,  234 ;  Butler  v.  Eaton,  lb.  240.) 

Right  of  Stockholders  to  Transfer.— A  shareholder  in  a  Na- 
tional bank,  while  it  is  a  going  concern,  has  the  absolute  right,  in 
the  absence  of  fraud,  to  make  a  bona  fide  and  actual  sale  and  trans- 
fer of  his  shares  at  any  time,  to  any  person  capable  in  law  of  pur- 
chasing and  holding  the  same,  and  of  assuming  the  transferror's 
liabilities  in  respect  thereto,  and  this  right  is  not  subject,  in  such 
cases,  to  the  control  of  the  directors  or  other  stockholders.  (John- 
son V.  lyaflin,  5  Dill,  65.)  The  directors  are  authorized  to  prescribe 
regulations  under  which  the  transfer  of  stock  shall  be  made ;  but 
these  regulations  must  be  reasonable,  and  under  the  pretence  of 
prescribing  the  manner  thereof,  the  directors  can  not  clog  the 
transfer  with  useless  restrictions.  (Johnson  zk  Laflin,  103  U.  S., 
800.)  The  transfer  does  not  require  to  be  approved  by  the  direc- 
tors, nor  can  they  decline  to  make  it  in  a  proper  case,  (5  Dill.,  65.) 
But  where  the  transfer  is  sought  to  be  made  to  a  person  incapable 
in  law  of  assuming  the  liabilities  of  a  stockholder — as  where  it  is 
made  to  an  infant,  or  to  a  person  of  unsound  mind— then  the 
directors  might  refuse  to  permit  the  transfer  to  be  registered,  for 
such  a  transfer  is  a  fraud  upon  the  corporation,  the  stockholders 
and  creditors.  And  so  they  might  refuse  where  the  transfer  is  evi- 
dently made  merely  for  the  purpose  of  escaping  liability,  as  where 
a  shareholder  in  an  insolvent  bank  seeks  to  transfer  his  stock  to 
a  pauper,  or  man  of  straw,  or  to  an  insolvent  or  irresponsible  per- 
son. Where  the  person  intrusted  by  the  directors  with  the  duty  of 
entering  the  transfers  on  the  books  of  the  bank,  refuses  for  insuf- 


27 

ficient  reason,  to  note  a  transfer,  the  bank  will  be  liable  for  the 
damages  resulting  tlierefroni.  (Case  v.  Citizens'  Bank,  loo  U.  S-, 
446  ) 

On  December  30,  1875,  A  sold  certain  shares  of  bank  stock  to 
B,  and  assigned  them  by  a  transfer  written  on  the  back  of  the  cer- 
tificate. By  the  by-laws  of  the  bank,  stock  was  transferable  only 
on  the  books  of  the  company.  On  December  14,  1S78,  the  shares 
were  attached  by  a  judgment  creditor  of  A  and  sold  and  trans- 
ferred to  C.  Neither  the  bank  nor  the  creditor  had  knowledge  of 
the  transfer  to  B.  In  January,  1880,  B  presented  his  certificate 
and  transfer  to  the  ofiicers  of  the  bank  and  demanded  a  transfer  of 
the  stock,  which  was  refused,  whereupon  he  brought  suit  against 
the  bank  for  such  refusal :  Held,  That  the  bank  was  liable  in  dam- 
ages for  the  refusal  to  transfer  the  sliares.  (Hazard  v.  National 
Exchange  Bank  of  Newport,  26  Fed.  Rep.,  94.) 

Specific  Performance. — A  court  of  equity  will  not  enforce 
specific  performance  of  an  agreement  to  sell  shares  in  a  National 
bank  to  enable  the  purchaser  to  obtain  control  of  the  bank,  for  the 
reason  that,  (i)  equity  will  not  generally  enforce  specific  execution 
of  a  contract  relating  to  personal  chattels,  and  (2 )  because  a  decree 
enforcing  the  agreement  in  question  would  be  against  public  pol- 
icy.    (Foil's  Appeal,  21  Alb.,  I^  J.;  2  N.  B.  C,  411.) 

19.    When  Capital  Stock  Must  be  Paid  In. 

Section  5140. — At  least  fifty  per  centum  of  the  capital  stock  of  every  asso- 
ciation shall  be  paid  in  before  it  shall  be  authorized  to  commence  business ; 
and  the  remainder  of  the  capital  stock  of  such  association  shall  be  paid  in 
instaUments  of  at  least  ten  per  centum  each,  on  the  whole  amount  of  the 
capital,  as  frequently  as  one  installment  at  the  end  of  each  succeeding  month 
from  the  time  it  shall  be  authorized  by  the  Comptroller  of  the  Currency  to 
commence  business;  and  the  payment  of  each  installment  shall  be  certified 
to  the  Comptroller,  under  oath,  by  the  president  or  cashier  of  ihe  association. 

Payment  of  Subscriptions. — Probably  the  theory  of  the  law 
is,  that  each  subscriber  .'^hall  pay  half  of  his  subscription  down, 
and  the  remainder  in  five  equal  monthly  installments;  this  is 
really  what  a  subscriber  to  National  bank  stock,  who  is  expected 
to  know  the  law,  agrees  to  do,  but  the  Comptroller  does  not  usu- 
ally require  a  certificate  in  detail,  but  only  that  capital  amounting 
to  50  per  cent.,  or  10  per  cent.,  as  the  case  may  be,  has  in  the  ag- 
gregate been  paid  in.     It  is  sometimes  convenient  for  some  sub- 


28 

aTibers  to  pay  more  at  once,  and  this  enables  the  officers  to  certify 
the  payments  necessary  to  comply  with  the  letter  of  the  law,  with- 
out waiting  for  the  slower  subscribers.  When  this  plan  is  adopted 
in  order  to  hold  the  other  subscribers,  a  contract  should  be  entered 
into  with  them.     (See  note  on  next  section.) 

Certifying  Payments. — The  officers  certify  50  per  cent.  paid. 
This  is  the  certificate  of  officers  required  by  section  5168,  par.  21, 
post,  and  is  called  the  first  instalbnent.  Upon  the  receipt  of  this 
the  Comptroller  ma}^  if  bonds  have  been  deposited,  authorize  the 
bank  to  commence  business.  The  date  of  the  Comptroller's  certi- 
ficate of  authority  to  commence  business  fixes  the  date  of  the  pay- 
ment of  the  succeeding  installments.  The  Comptroller's  office 
furnishes  blanks  upon  which  to  certify  payment  of  capital.  (For 
form,  see  Appendix.) 

30.    Failure  to  Pay  Installments  on  Stock,  etc. 

Section  5 141. — Whenever  any  shareholder,  or  his  assignee,  fails  to  pay 
any  installment  on  the  stock  when  the  same  is  required  by  the  preceding 
section  to  be  paid,  the  directors  of  such  association  may  sell  the  stock  of 
such  delinquent  shareholder  at  public  auction,  having  given  three  weeks' 
previous  notice  thereof  in  a  newspaper  published  and  of  general  circula- 
tion in  the  city  or  county  where  the  association  is  located,  or  if  no  news- 
paper is  published  in  said  city  or  county,  then  in  an  newspaper  published 
nearest  thereto,  to  any  person  who  will  pay  the  highest  price  therefor,  to 
be  not  less  than  the  amount  then  due  thereon,  with  the  expenses  of  adver- 
tisement and  sale;  and  the  excess,  if  any,  shall  be  paid  to  the  delinquent 
shareholder.  If  no  bidder  can  be  found  who  will  pay  for  such  stock  the 
amount  due  thereon  to  the  association,  and  the  cost  of  advertisement  and 
sale,  the  amount  previously  paid  shall  be  forfeited  to  the  association,  and  such 
stock  shall  be  sold  as  the  directors  may  order,  within  six  months  from  the 
time  of  such  forfeiture,  and  if  not  sold  it  shall  be  canceled  and  deducted 
from  the  capital  stock  of  the  association.  If  any  such  cancellation  and 
reduction  shall  reduce  the  capital  of  the  association  below  the  minimum  of 
capital  required  by  law,  the  capital  stock  shall,  within  thirty  days  from  the 
date  of  such  cancellation,  be  increased  to  the  required  amount;  in  default  of 
which  a  receiver  may  be  appointed,  according  to  the  provisions  of  section 
fifty-two  hundred  and  thirty-four,  to  close  up  the  business  of  the  association. 

Subscriber's  Liability. — This  section  is  entirely  for  the  direc- 
tion of  bank  managers,  and  points  out  the  proper  course  to  be 
taken  in  bringing  in  the  capital  of  the  bank.  It  must  be  remem- 
bered that  from  the  time  of  his  subscription  a  person  becomes  a 


29 

shareholder,  and  that  all  the  shareholders  have  entered  into  a 
contract  among  themselves,  and  are  mutually  responsible  to  each 
other.  If  only  five  persons  stSrt  the  bank,  and  subscribe  for  all 
the  stock,  with  the  purpose  of  afterward  distributing  the  same 
among  a  number  of  parties,  it  is  well  for  each  of  the  five  asso- 
ciates to  have  his  distributees  selected  and  to  bind  them  by  a 
formal  contract  with  himself  to  each  take  the  stock  he  destines  for 
them. 

Legal  Status  of  Stock.— The  stock  doubtless  has  a  legal 
standing  before  a  single  payment  is  made,  and  the  association  may 
be  legally  organized  and  become  a  body  corporate  before  a  single 
dollar  of  the  capital  is  paid  in  by  anyone.  Thus  sales  or 
transfers  of  stock  may  take  place  before  any  capital  is  paid  in. 
This  is  in  line  with  the  decision  of  the  United  States  Supreme 
Court  in  Van  Allen  v.  Assessors,  3  Wall.,  573,  which  holds  a  share 
of  stock  to  be  an  entity  distinct  from  capital.  The  actual  holder 
or  subscriber,  in  whose  name  the  stock  stands  on  the  books  of  the 
bank  at  the  time  the  directors  call  for  the  payment  of  the  first 
installment  of  50  per  cent.,  must  pay  it,  and  payment  can  doubt- 
less be  compelled  by  legal  proceedings.  The  section  under  con- 
sideration does  not  refer  to  this  first  installment,  but  to  the  subse- 
quent installments,  the  dates  of  payment  of  which  were  fixed  by 
the  preceding  section.  The  whole  tenor  of  section  5141  implies  a 
previous  payment  of  50  per  cent.,  which  is  in  the  nature  of  a  for- 
feit, if  the  stock  has  to  be  sold  on  account  of  failure  to  meet  the 
subsequent  installments. 

Limit  for  Paying  in  Capital. — A  new  association  would, 
strictly,  under  this  section,  have  the  following  time  to  make  good 
its  capital  before  a  receiver  could  be  appointed  ;  First,  the  time 
until  the  installment  became  due ;  then  three  weeks  for  notice  by 
publication  ;  then  six  months  from  forfeiture  to  cancellation  ;  and, 
finally,  thirty  days  longer  in  which  to  bring  up  capital  to  required 
amount.  How  capital  is  to  be  made  good  in  such  case  is  not  dis- 
tinctly stated,  but  probably  by  assessment  on  remaining  stock- 
holders.    (See  section  5205,  par.  83,  post.') 

21.     Comptroller  to  Determine  if   Association   is   Entitled   to  Com- 
mence  Business. 

Section  5168. — Whenever  a  certificate  is  transmitted  to  the  Comptroller 
of  the  Currency,  as  provided  in  this  Title,  and  the  association  transmitting 


30 

the  same  notifies  the  Comptroller  that  at  least  fifty  per  centum  of  its  capital 
stock  has  been  duly  paid  in,  and  that  such  association  has  complied  with  all 
the  provisions  of  this  Title  recjuired  to  fee  complied  with  before  an  association 
shall  be  authorized  to  commence  the  business  of  bankmg,  the  Comptroller 
shall  examine  into  the  condition  of  such  association,  ascertain  especially  the 
amount  of  money  paid  in  on  account  of  its  capital,  the  name  and  place  of 
residence  of  each  of  its  directors,  and  the  amount  of  the  capital  stock  of 
which  each  is  the  owner  in  good  faith,  and  generally  whether  such  associa- 
tion has  complied  with  all  the  provisions  of  this  Title  required  to  entitle  it  to 
engage  in  the  business  of  banking ;  and  shall  cause  to  be  made  and  attested 
by  the  oaths  of  a  majority  of  the  directors,  and  by  the  president  or  cashier 
of  the  association,  a  statement  of  all  the  facts  necessary  to  enable  the  Comp- 
troller to  determine  whether  the  association  is  lawfully  entitled  to  commence 
the  business  of  banking. 

Certificate  of  Officers  and  Directors. — The  certificate  de- 
scribed in  this  section  is  that  known  in  the  Coiuptroller's  oflSce  as 
"  Certificate  of  0£&cers  and  Directors."  The  certificate  contains 
the  notification  and  statements  mentioned  in  the  section.  (For 
form  see  pages  208,  209. 

Preliminary  Examination. — The  Comptroller  has  under  this 
and  the  subsequent  section  the  right  to  send  an  examiner  before 
granting  his  certificate  of  authority  to  commence  business.  When 
the  Association  is  formed  by  reorganization  of  a  private  or  State 
bank,  it  is  customary  for  the  Comptroller  to  have  an  examination 
made  to  ascertain  fully  the  character  of  the  bank's  assets — but  if 
the  bank  is  organized  de  novo,  the  examination  may  not  be  or- 
dered until  after  the  bank  has  begun  business. 

22.    Certificates  of  Authority  to  Commence  Business. 

Section  5169. — If,  upon  a  careful  examination  of  the  facts  so  reported, 
and  of  any  other  facts  which  may  come  to  the  knowledge  of  the  Comptroller, 
whether  by  means  of  a  special  commission  appointed  by  him  for  the  purpose 
of  inquiring  into  the  condition  of  such  association,  or  otherwise,  it  appears 
that  such  association  is  lawfully  entitled  to  commence  the  business  of  bank- 
ing, the  Comptroller  shall  give  to  such  association  a  certificate,  under  his 
hand  and  official  seal,  that  such  association  has  complied  with  all  the  provi- 
sions required  to  be  complied  with  before  commencing  the  business  of  bank- 
ing, and  that  such  association  is  authorized  to  commence  such  business.  But 
the  Comptroller  may  withhold  from  an  association  his  certificate  authorizing 
the  commencement  of  business,  whenever  he  has  reason  to  suppose  that  the 
shareholders  have  formed  the  same  for  any  other  than  the  legitimate  objects 
contemplated  by  this  Title. 

See  note  to  preceding  section. 


31 

23'    Publication  of  Certificate. 

Section  5170. — The  association  shall  cause  the  certificate  issued  under  the 
preceding  section  to  be  published  in  some  newspaper  printed  in  the  city  or 
county  where  the  association  is  located,  for  at  least  sixty  days  next  after  the 
issuing  thereof;  or,  if  no  newspaper  is  pubhshed  in  such  city  or  county,  then 
in  the  newspaper  published  nearest  thereto. 

This  refers  to  the  certificate  of  authority  to  begin  business.  An 
insertion  in  a  weekly  newspaper,  or  in  a  weeklj'-  edition  of  a  daily, 
during  the  sixty  days  is  sufficient.  The  Comptroller  requires  the 
publisher's  oath  of  publication  and  a  copy  of  the  paper  containing 
the  notice,  as  evidence  of  publication  for  the  time  required. 

24.    Increase  of  Capital  Stock. 

Section  5142. — Any  association  formed  under  this  Title  may,  by  its  articles 
of  association,  provide  for  an  increase  of  its  capital  from  time  to  time,  as  may 
be  deemed  expedient,  subject  to  the  limitations  of  this  Title.  But  the  maxi- 
mum of  ^uch  increase  to  be  provided  in  the  articles  of  association  shall  be 
determined  by  the  Comptroller  of  the  Currency;  and  no  increase  of  capital 
shall  be  valid  until  the  whole  amount  of-  such  increase  is  paid  in,  and  notice 
thereof  has  been  transmitted  to  the  Comptroller  of  the  Currency,  and  his 
certificate  obtained  specifying  the  amount  of  such  increase  of  capital  stock, 
with  his  approval  thereof,  and  that  it  has  been  duly  paid  in  as  part  of  the 
capital  of  such  association. 

Obsolete  Provisions. — Several  of  the  provisions  of  this  section 
have  been  rendered  obsolete  by  the  act  of  May  i ,  1 886.  (See  posi 
par.  199.)  It  is  no  longer  necessary  to  insert  in  the  articles  of 
association  any  provisions  for  an  increase  of  the  capital  stock ;  for 
now,  by  the  act  referred  to,  shareholders  owning  two-thirds  of  the 
shares  may  increase  the  capital  stock  at  any  time  and  to  any 
amount,  subject  only  to  the  approval  of  the  Comptroller  of  the 
Currency,  and  this  notwithstanding  that  the  articles  of  association 
contain  a  provision  fixing  a  maximum  limit.  The  increase  must 
now  be  made  by  the  shareholders,  and  not  by  the  directors,  and 
all  provisions  in  the  articles  of  association  of  banks  organized  prior 
to  May  I,  1886,  authorizing  directors  to  increase  the  stock,  have 
become  wholly  nugatory.  But  the  provisions  that  the  whole 
amount  of  the  increase  must  be  paid  in,  and  notice  thereof  trans- 
mitted to  the  Comptroller  of  the  Currency,  and  his  approval 
obtained,  before  the  increase  can  take  effect,  still  remain  in  force. 

Procedure. — When  it  is  desired  to  increase  the  capital  stock, 
the  first  step  is  to  call  a  meeting  of  shareholders  and  secure  the 
adoption  of  a  suitable  resolution  authorizing  the  increase.     This 


32 

resolution  must  receive  the  votes  of  shareholders  representing  at 
least  two-thirds  of  the  existing  stock,  and  it  is  not  sufficient  that 
the  resolution  is  passed  by  a  vote  of  shareholders  owning  two- 
thirds  of  the  shares  represented  at  the  meeting.  The  next  step  is 
to  open  subscriptions  for  the  new  stock.  When  all  the  new  stock 
shall  have  been  subscribed  and  paid  for,  the  proceedings  should  be 
certified  to  the  Comptroller  of  the  Currency,  and  his  approval 
requested.  The  Comptroller  then,  if  satisfied  that  the  bank's  con- 
dition admits  of  an  increase  and  that  it  is  made  in  good  faith,  gives 
his  approval.  (Forms  to  be  used  in  making  the  increase  will  be 
found  on  pages  271,  272.) 

Waiver  of  Formalities. — The  National  Bank  Act  confers  upon 
the  National  banks  the  abstract  power  to  increase  their  capital 
stock,  and  such  power  exists  independently  of  the  separate  steps 
required  to  be  taken  b}^  the  stockholders  in  the  exercise  of  the 
power  ;  and  hence  any  irregularities  or  informalities  in  the  exercise 
of  that  power  may  be  waived  by  the  subscriber.  (L,atimer  v.  Bard, 
76  Fed.  Rep.,  536.) 

Right  of  Shareholders  to  Subscribe  for  New^  Shares. —  The 

articles  of  association  generally  contain  a  provision  that,  in  case  of 
the  increase  of  the  capital  stock,  each  shareholder  shall  have  the 
privilege  of  subscribing  for  such  portion  of  the  new  stock  as  he 
may  be  entitled  to,  according  to  the  number  of  shares  in  the  exist- 
ing stock  held  by  him  at  the  time.  But  this  provision  is  merely 
declarative  of  a  right  incident  to  the  ownership  of  stock,  and  which 
would  exist  though  there  were  no  such  provision  in  the  articles ; 
for  it  is  a  general  rule  of  law  that  where  the  capital  stock  of  a  cor- 
poration is  increased,  each  shareholder  has  a  right  of  pre-emption 
to  the  new  stock  in  proportion  to  his  shares  in  the  original  stock. 
But  shareholders  may,  of  course,  waive  their  right  to  take  the  new 
stock,  and  this  is  frequently  done.  And  the  waiver  need  not  be 
expressed ;  it  may  be  given  tacitly.  It  may  be  implied  from  the 
failure  of  the  shareholder  to  avail  himself  of  his  right  within  a  rea- 
sonable time.  But  the  safer  course,  and  the  one  which  the  direct- 
ors and  officers  should  generally  adopt,  is  to  have  the  waiver  given 
in  writing.  In  this  matter  each  shareholder  is  bound  only  by  his 
own  action  ;  he  can  not  be  deprived  of  his  right  of  pre  emption  by 
any  vote  or  assent  of  the  other  shareholders,  notwithstanding  they 
may  own  two-thirds,  or  more,  of  the  stock. 


33 

Comptroller's  Approval — Recovery  of  Money  Paid  Where 
Increase  Not  Made. — The  stock  of  a  National  bank  can  not  be 
lawfully  increased  before  the  entire  amount  of  the  new  capital  has 
been  paid  in  and  the  Comptroller  of  the  Currency  has  certified  to 
the  increase  and  to  the  fact  of  payment  in  the  mode  prescribed  by 
Section  5142,  Rev.  Stat.  U.  S.  (Cornell's  Executors  v.  First 
National  Bank  of  Kansas  City,  32  U.  S.  App.,  426.  McFarlin  v. 
National  Bank  of  Kansas  City,  68  Fed.  Rep.,  868  ;  Charleston  v. 
People's  National  Bank,  5  S.  C,  103.)  But  perhaps  a  case  may 
arise  where  a  subscriber  would  be  estopped  from  asserting,  as 
against  a  creditor,  that  he  was  not  a  stockholder,  even  though  the 
provisions  of  the  statute  had  not  been  strictly  followed.  (McFarlin 
V.  First  National  Bank  of  Kansas  City,  supra.)  Where  money 
paid  in  on  subscriptions  to  an  increase  of  capital  is  received  by  a 
bank  as  a  trust  fund  to  be  applied  to  that  purpose,  and  before  the 
increase  is  approved  by  the  Comptroller  and  his  certificate  issued, 
the  bank  fails,  the  money  so  paid  may  be  recovered  by  the  sub- 
scribers.    {Id.') 

Where  Whole  Amount  of  Increase  is  Not  Taken. — In  a 
former  edition  of  this  Digest  it  was  stated  on  the  authority  of 
Eaton  V.  Pacific  Bank  (144  Mass.,  260),  that  it  is  a  condition  pre- 
cedent to  the  increase  of  capital  stock,  that  the  entire  amount 
thereof  should  be  subscribed  and  paid  for.  But  this  view  has  since 
been  overruled  by  the  Supreme  Court  of  the  United  States.  That 
court  holds  that  where  an  increase  of  the  capital  stock  is  authorized 
in  a  certain  sum  there  is  no  implied  condition  that  the  subscription 
shall  be  void  if  the  whole  amount  so  authorized  is  not  subscribed, 
(Aspinwall  v.  Butler,  133  U.  S.,  595.)  The  provision  of  the  statute 
that  "no  increase  of  capital  shall  be  valid  until  the  whole  amount 
of  such  increase  is  paid  in  and  notice  thereof  has  been  transmitted 
to  the  Comptroller  of  the  Currency,  and  his  certificate  obtained 
.specifying  the  amount,"  etc.,  was  intended  to  secure  the  actual 
payment  of  the  stock  subscribed,  so  as  to  prevent  "watering"  the 
stock ;  and  it  is  not  violated  by  the  issue  of  less  new  stock  than  the 
full  amount  authorized,  if  the  amount  so  issued  is  the  exact 
amount  paid  in.  (Aspinwall  v.  Butler,  133  U.  S.,  595;  see  also 
Delano  v.  Butler,  118  U.  S.,  634.)  Therefore,  where  a  shareholder 
subscribes  his  additional  and  proportional  share  towards  doubling 
its  capital  and  actually  pays  his  subscriptions,  the  fact  that  the 
stockholders,  with  the  assent  of  the  Comptroller  of  the  Currency, 
3 


34 

reduce  the  amount  of  the  stock  they  had  proposed  to  issue,  does 
not  permit  him  to  repudiate  his  subscription  and  recover  the  money- 
paid  on  it.     (Pacific  National  Bank  v.  Eaton,  141  U.  S.,  227.)  [See 
also  Supplement.]     But  if  there  were  a  large  and  material  defi- 
ciency in  the  amount  of  capital  contemplated,  equity  might  inter- 
fere to  protect  subscribers.     (Aspinwall  v.  Butler,  133  U.  S.,  595.) 
In    1892  the  stockholders  of  the  C.    National    Bank  voted   to 
increase  the  capital  stock  $300,000;  and  M.  subscribed  for  twenty- 
three  shares  of  such  increase  and  paid  in  the  amount  of  his  sub- 
scription.    The  full   amount  of  such  increase   not   having   been 
taken,  the  President  and  Cashier  called  a  meeting  of  stockholders 
in  1895,  at  which  meeting  an  increase  of  capital  stock  in  the  sum 
of  $150,000  was  authorized,  which  was  approved  by  the  Comptrol- 
ler of  the  Currency.     M.  was  not  present  at  such  meeting,  though 
one  B. ,  who  held  a  proxy  authorizing  him  to  attend  meetings  of 
shareholders  and  represent  M.'s  stock,  was  present.  Held,  that  the 
subsequent  action  of  the  stockholders  was  not  binding  upon  M., 
and  that  he  could  recover  the  amount  paid  in  by  him.     (Matthews 
V.  Columbia  National  Bank,  79  Fed.  Rep.,  558.) 

In  an  action  to  recover  money  deposited  with  a  National  bank 
the  plaintifi"  may  show  that  stock  issued  by  the  bank  in  his  name 
was  issued  to  him  merely  as  collateral  security  for  such  deposit. 
(Williams  v.  American  National  Bank  of  Arkansas  City,  85  Fed. 
Rep.,  376.) 

In  such  an  action  it  is  no  defense  to  the  bank  that  the  stock  was 
issued  without  authority  of  law.     (.Id.) 

25.    Reduction  of  Capital  Stock. 

Section  5143. — Any  association  formed  under  this  Title  may,  by  the  vote 
of  shareholders  owning  two-thirds  of  its  capital  stock,  reduce  its  capital  to  any 
sum  not  below  the  amount  required  by  this  Title  to  authorize  the  formation 
of  associations ;  but  no  such  reduction  shall  be  allowable  which  will  reduce 
the  capital  of  the  association  below  the  amount  required  for  its  outstanding 
circulation,  nor  shall  any  such  reduction  be  made  until  the  amount  of  the 
proposed  reduction  has  been  reported  to  the  Comptroller  of  the  Currency  and 
his  approval  thereof  obtained. 

Procedure. — Where  a  reduction  of  the  capital  stock  is  con- 
templated, it  is  always  best,  as  the  first  step,  for  the  proper  oflficers 
of  the  bank  to  write  to  the  Comptroller  of  the  Currency  and 
advise  him  of  what  is  intended,  and  ask  him  to  furnish  forms  and 
instructions,  for  it  may  be  that  the  Comptroller,  for  some  cause, 


35 

will  not  approve  of  the  reduction,  or  there  may  be  some  reason 
why  it  can  not  be  legally  made.  If  the  Comptroller  makes  no 
objection  to  the  proposed  reduction — and  usually  he  does  not, 
where  the  bank  is  solvent  and  there  is  no  legal  obstacle — the  next 
step  is  to  call  a  meeting  of  stockholders,  which  should  be  done 
in  the  manner  pointed  out  in  the  note  to  the  next  section.  The 
shareholders  should  then  adopt  a  suitable  resolution,  authorizing 
a  reduction  of  the  stock.  The  votes  in  favor  of  the  resolution 
must  represent  two-thirds  or  more  of  all  the  stock  of  the  bank, 
and  it  is  not  sufl&cient  that  two-thirds  of  a  quorum  vote  in  favor 
of  it.  The  resolution  should  state  the  intention  of  the  stock- 
holders clearly,  but  it  is  not  required  to  be  in  any  special  form.  If 
it  is  desired  that  the  redu  ction  shall  take  effect  from  a  certain 
date,  a  provision  to  that  effect  should  be  inserted  in  the  resolution  ; 
otherwise,  the  reduction  will  take  effect  from  the  date  on  which 
the  Comptroller  gives  his  formal  approval.  But  in  no  case  is  the 
reduction  effectual  until  the  approval  of  the  Comptroller  is  given. 
Forms  upon  which  to  certify  to  the  Comptroller  that  the  necessary 
steps  have  been  taken  by  the  shareholders  are  furnished  by  that 
officer.     (For  forms,  see  pages  272,  273.) 

Usually  the  course  is  for  each  stockholder  to  relinquish  and  sur- 
render up  to  be  canceled  a  pro  rata  portion  of  his  stock,  but  this 
is  not  the  only  course  that  may  be  pursued.  If  some  of  the  stock- 
holders are  v/illing  to  surrender  enough  of  their  stock  to  make  up 
the  whole  amount  of  the  reduction,  there  is  no  necessity  that  the 
holdings  of  the  other  stockholders  should  be  reduced  at  all.  The 
issue  of  fractional  shares  is  sometimes  unavoidable,  and  is  per- 
mitted. 

When  Capital  Can  Not  be  Reduced. — There  can,  of  course, 

be  no  reduction  of  the  capital  stock  below  the  minimum  amount 
of  capital  required  by  Section  5138,  Revised  Statues,  (par.  17,)  nor 
can  any  existing  bank  reduce  its  capital  below  the  amount  required 
for  a  new  institution  established  in  the  same  place,  although  the 
population  of  such  place  at  the  time  such  bank  was  organized 
would  have  permitted  of  an  organization  with  a  smaller  capital. 
As  to  whether  a  National  bank  which  did  not  obtain  the  approval 
of  the  Secretary  of  the  Treasury  to  organize  with  a  capital  stock 
of  less  than  ^100,000,  but  organized  with  that  amount  or  more, 
can  reduce  its  capital  below  $100,000,  there  is  a  difference  of  opin- 
ion, and  different  Comptrollers  have  held  variously  on  the  subject. 


36 

But,  considering  that  it  is  a  fundamental  rule  of  law,  that  there 
can  be  no  change  whatever  made  in  the  capital  stock  of  a  corpora- 
tion, unless  there  is  a  clear  authority  found  in  the  statute  to  make 
such  a  change,  we  would  say  that  it  would  be  unsafe  for  any  bank 
to  make  such  a  reduction.  It  is  to  be  remembered  by  those  hav- 
ing the  management  of  National  banks  that  the  important  question 
is  not  whether  the  Comptroller  will  approve  of  the  reduction,  but 
what  are  the  liabilities  of  the  stockholders  and  directors  in  such  a 
case ;  for,  if  the  statute  does  not  authorize  such  a  change  in  the 
capital  stock,  the  approval  of  the  Comptroller  can  afford  them  no 
protection,  and  the  risks  they  incur  are  very  serious. 

Capital  Set  Free  Can  Not  be  Retained  by  Bank. — When  the 
capital  stock  is  reduced  the  amount  so  set  free  belongs  to  the  stock- 
holders, in  proportion  to  the  number  of  shares  held  by  each,  and 
it  must  be  returned  to  them ;  it  can  not  be  retained  by  the  bank 
for  a  surplus  fund,  or  for  any  other  purpose.  In  this  matter  the 
directors  have  no  discretion.  (Seeley  v.  New  York  National 
Exchange  Bank,  8  Dah^  400;  affirmed,  78  N.  Y.,  608.)  And  as 
such  released  capital  ceases  to  be  the  property  of  the  corporation, 
and  becomes  the  property  of  the  individual  stockholders.  Its  reten- 
tion by  the  bank  can  not  be  authorized  by  a  majority  of  the  stock- 
holders, no  matter  how  large ;  but  each  stockholder  is  entitled  to 
claim  his  portion,  and  can  not  be  deprived  of  this  right  against  his 
own  consent.  But  frequently  the  shareholders  waive  their  right  to 
withdraw  the  released  capital,  and  agree  to  leave  it  with  the  bank 
to  be  used  for  a  surplus  fund  or  otherwise ;  and,  sometimes,  where 
it  seems  that  a  reduction  of  capital  might  injuriously  affect  credi- 
tors, the  Comptroller  requires  such  an  agreement  on  the  part  of 
the  stockholders  as  a  condition  precedent  to  his  approval  of  the 
reduction. 

Reduction  of  Capital  to  Meet  Impairment. — Where  the 
capital  stock  of  a  National  bank  has  been  reduced  in  order  to  meet 
an  impairment  thereof  there  can  be  no  withdrawal  of  assets ;  for, 
prima  fade,  any  further  withdrawal  of  assets  would  result  in  still 
further  impairment  of  the  capital.  (McCann  v.  First  National 
Bank  of  Jeffersonville,  112  Ind.,  354.)  In  the  case  cited  the 
capital  of  a  National  bank  having  become  impaired  by  the  non- 
payment of  the  interest  on  some  paper  among  its  assets,  to  the 
amount  of  $71,000,  in  order  to  avoid  an  assessment  by  the  Comp- 


37 

troller,  the  stockholders  reduced  its  capital  stock,  and  carried  the 
bills  and  notes  to  the  account  of  suspended  or  "  bad  debts,"  which 
were  not  thereafter  included  as  assets,  although  retained  in  its 
custody.  Some  years  afterwards  the  bank  realized  $75,000  from 
collaterals  pledged  for  the  security  of  that  paper,  and  a  stock- 
holder brought  an  action  to  recover  his  share  of  the  amount 
realized,  proportioned  to  the  amount  of  stock  surrendered :  Held^ 
That  he  could  not  recover. 

26.    Rights  of  Shareholders  at  Elections. 

Section  5144. — In  all  elections  of  directors,  and  in  deciding  all  questions 
at  meetings  of  shareliolders,  each  shareholder  shall  be  entitled  to  one 
vote  on  each  share  of  stock  held  by  him.  Shareholders  may  vote  by 
proxies  duly  authorized  in  writing;  but  no  officer,  clerk,  teller,  or  book- 
keeper of  such  association  shall  act  as  proxy ;  and  no  shareholder  whose  lia- 
bility is  past  due  and  unpaid  shall  be  allowed  to  vote. 

Shareholders'  Meetings. — The  articles  of  association  and  by- 
laws of  banks  usually  provide  that  meetings  of  shareholders  shall 
be  called  by  publishing  notice  thereof  for  thirty  days  in  a  news- 
paper, or  by  notifying  the  shareholders  individually  in  writing. 
The  latter  is  probably  the  method  most  commonly  used.  In  the 
absence  of  any  regulation  on  the  subject,  the  better  course  would 
seem  to  be  to  send  each  shareholder  written  or  printed  notice  such 
a  reasonable  time  in  advance  of  the  meeting  as  to  enable  him  to  be 
present  if  he  desires.  In  every  case  due  notice  must  be  given,  and 
for  want  of  due  notice  to  the  shareholders  the  proceedings,  unless 
acquiesced  in  or  ratified  by  all,  may  be  set  aside  as  invalid. 

When  any  act  to  be  done  by  the  association  requires  the  assent 
of  the  shareholders,  their  assent,  unless  unanimous,  must  be  given 
at  a  duly  convened  meeting  of  shareholders.  The  assent  in  writ- 
ing of  shareholders  owning  the  requisite  amount  of  stock  is  not 
sufficient,  and  will  not  be  binding  upon  any  non-assenting  share- 
holder. The  action  of  a  majority,  no  matter  how  large,  can  not 
be  binding  upon  a  minority,  no  matter  how.  small,  when  not  taken 
at  a  meeting  of  shareholders  at  which  every  shareholder  has  an 
opportunity  to  be  represented,  either  in  person  or  by  prox3^  The 
only  exception  to  this  rule  is  in  the  case  of  the  amendment  of  the 
articles  of  association  extending  the  period  of  corporate  existence, 
the  consent  of  the  shareholders  to  which  the  law  expressly  author- 
izes to  be  given  in  writing. 

The  mistake   is   frequently  made  of  supposing   that   business 


38 

requiring  the  action  of  the  stockholders  can  be  transacted  at  a 
meeting  of  the  board  of  directors  when  the  directors  own  a 
majority  of  the  stock,  or  the  amount  of  stock  necessary  to  deter- 
mine the  actions  of  the  shareholders,  in  respect  to  such  business 
at  a  shareholders'  meeting.  But  the  rule  of  law  is  that  every 
stockholder  has  a  right  to  be  present  at  the  meeting,  and  to  express 
his  assent  or  dissent ;  and  this  he  has,  of  course,  no  opportunity 
of  doing  when  the  business  is  considered  at  a  meeting  of  the 
directors. 

"Where  the  articles  of  association  of  a  National  bank  provide  that 
meetings  of  the  stockholders  may  be  called  by  the  board  of  direc- 
tors or  by  any  three  stockholders,  a  meeting  called  by  the  Presi- 
dent and  Cashier  is  not  lawfully  convened.  (Matthews  v.  Columbia 
National  Bank,  79  Fed.  Rep.,  558. ) 


Proxies. — There  is  some  doubt  whether  the  word  ^'officer''  in 
the  provision  forbidding  any  '^officer,  clerk,  teller,  or  book-keeper" 
to  act  as  proxy,  means  only  an  executive  officer,  such  as  the  presi- 
dent, vice-president,  or  cashier,  or  whether  it  applies  as  well  to  a 
director.  There  does  not  appear  to  have  ever  been  any  judicial 
decision  on  the  point,  which  seems  rather  extraordinary,  for  the 
question  must  frequently  have  arisen  at  meetings  of  shareholders. 
The  view  formerly  taken  in  the  office  of  the  Comptroller  of  the 
Currency  was  that  a  director  is  not  an  officer  within  the  intend- 
ment of  this  provision.  But  the  contrary  view  is  now  held  in 
that  office.  The  closing  paragraph  of  Section  5240  would  seem  to 
sustain  this  ruling,  and  this  appears  to  better  conform  to  the  spirit 
of  the  law.  The  obvious  intention  of  the  law  is  that  no  person 
shall  act  as  proxy  who  is  likely  to  have  an  interest  in  the  action  of 
the  stockholders  which  may  not  be  consonant  with  the  interests  of 
the  corporation.  A  director  therefore  would  seem  to  be,  more  than 
anyone  else,  within  the  spirit  of  the  provision.  The  evil  which  the 
law  aims  to  prevent  is  greatest  in  his  case.  The  bank  is  under 
the  control  of  the  directors,  who  have  the  entire  management  of 
its  affairs,  and  they  have,  in  many  cases,  a  great  personal  interest 
in  the  action  of  the  meeting,  and  especially  where  the  meeting  is 
held  for  the  election  of  directors,  and  the)^  are  candidates  for  re- 
election. In  all  cases  it  is  better,  in  order  to  avoid  any  question, 
that  the  proxy  shall  be  a  person  not  identified  in  any  way  Vvith 
the  management  of  the  bank.   (For  form  of  proxy,  see  page  274.) 

A  proxy  cannot  bind  his  principal  by  attending  at,  and  partici- 


39 

pating  in,  a  meeting  of  stockholders  not  lawfully  called.   (Matthews 
V.  Columbia  National  Bank,  79  Fed.  Rep.,  558) 

What  Liability  Disqualifies  Shareholder  to  Vote. — The 
provision  of  this  section  which  disqualifies  shareholders  "whose 
liability  is  past  due  and  unpaid"  applies  only  where  the  liability 
is  for  unpaid  subscriptions  for  stock,  and  was  not  intended  to  dis- 
qualif}'  shareholders  otherwise  indebted  to  the  bank.  (United 
States  ex  rel.  Cond  v.  Barry,  36  Fed.  Rep.,  246.) 

27.    Election  of  Directors. 

Section  5145. — The  affairs  of  each  association  shall  be  managed  by  not 
less  than  five  directors,  who  shall  be  elected  by  the  shareholders  at  a  meet- 
ing to  be  held  at  any  time  before  the  association  is  authorized  by  tlie  Comp- 
troller of  tlie  Currency  to  commence  the  business  of  banking;  and  afterward 
at  meetings  to  be  held  on  such  day  in  January  of  each  year  as  is  specified 
therefor  in  the  articles  of  association,  The  directors  shall  hold  office  for  one 
year,  and  until  their  successors  are  elected  and  have  qualified. 

See  note  to  Section  5147. 

28.     Qi!alifications  of  Directors. 

Section  5146. — Every  director  must,  during  his  whole  term  of  service,  be  a 
citizen  of  the  United  States,  and  at  least  three-fourths  of  the  directors  must 
have  resided  in  the  State,  Territory,  or  district  in  which  the  association  is 
located,  for  at  least  one  year  immediately  preceding  their  election,  and  must 
be  residents  therein  during  their  continuance  in  office.  Every  director  must 
own,  in  his  own  right,  at  least  ten  shares  of  the  capital  stock  of  the  associa- 
tion of  which  he  is  a  director.  Any  director  who  ceases  to  be  the  owner  of 
ten  shares  of  the  stock,  or  who  becomes  in  any  other  manner  disqualified, 
shall  thereby  vacate  his  place. 

See  note  to  Section  5147. 

Par  Value  of  Shares. — The  par  value  of  shares  not  being 
stated,  ten  shares  of  a  converted  bank,  though  of  lower  par  value, 
meet  the  requirement. 

29.    Oath  Required  from  Directors. 

Section  5147. — Each  director,  when  appointed  or  elected,  shall  take  an 
oath  that  he  will,  so  far  as  the  duty  devolves  on  him,  diligently  and  honestly 
adrninister  the  affairs  of  such  association,  and  will  not  knowingly  violate, 
or  willingly  permit  to  be  violated,  any  of  the  provisions  of  this  Title,  and  that 
he  is  the  owner  in  good  faith,  and  in  his  own  right,  of  the  number  of  shares 
of  stock  required  by  this  Title,  subscribed  by  him  or  standing  in  his  name  on 


40 

the  books  of  the  association,  and  that  the  same  is  not  hypothecated,  or  in  any 
way  pledged,  as  security  for  any  loan  or  debt.  Such  oath,  subscribed  by  the 
director  making  it,  and  certified  by  the  officer  before  whom  it  is  taken,  shall 
be  immediately  transmitted  to  the  Comptroller  of  the  Currency,  and  shall  be 
filed  and  preserved  in  his  office. 

Qualifications  of  Directors. — From  the  foregoing  two  sections 
it  will  be  seen  that  several  things  are  required  to  qualify  a  person 
foi  the  position  of  director.  He  must  be  a  citizen  of  the  United 
States,  must  own  in  his  own  right  not  less  than  ten  shares  of  the 
stock  of  the  bank,  and  must  hold  that  stock  free  from  pledge ;  and 
also,  at  least  three-fourths  of  the  directors  must  have  resided  in 
the  State,  Territory  or  district  where  the  bank  is  located,  for  one 
year  immediately  preceding  their  election,  and  must  be  residents 
therein,  during  their  continuance  in  office.  It  is  therefore  necessary 
that  in  a  Board  of  five,  four  must  be  residents.  In  a  Board  of 
seven,  six,  etc.  As  the  stock  must  be  held  in  the  director's  own 
right,  no  person  who  holds  stock  in  a  merely  representative  capa- 
city— as  an  executor,  administrator,  guardian,  or  trustee — can  be 
a  director.  An  unmarried  woman,  whether  a  widow  or  spinster, 
can  be  a  director  as  well  as  a  man  ;  and  so  may  a  married  woman 
in  those  States  where  the  laws  permit  her  to  assume  all  the  obli- 
gations of  a  stockholder.  A  director  who  owns  more  than  ten 
shares  of  stock  may  sell  or  pledge  all  of  his  stock  except  ten  shares, 
without  becoming  disqualified. 

Oath  of  Directors,— The  law  as  regards  directors'  oaths  is 
fatally  defective  in  that  it  fails  to  provide  before  what  ofiicer  it 
may  be  taken.  In  order  that  an  oath  can  have  any  efiicacy  as 
such,  and  especially  in  order  that  an  indictment  for  perjury  may 
be  sustained  thereon,  it  is  requisite  that  the  oath  shall  have  been 
prescribed  by  law,  and  that  it  shall  have  been  taken  before  an 
ofiicer  duly  aitthorized  to  administer  it.  The  act  of  February  26, 
1 88 1  (^post,  par.  185),  which  authorizes  an  oath  to  be  taken  before 
a  notary  public,  applies  only  to  the  oath  prescribed  by  Section  521 1, 
Revised  Statutes — the  oath  to  the  report  of  condition.  As  regards 
the  other  oaths  prescribed  by  the  National  banking  law,  there  does 
not  appear  to  be  any  ofiicer  competent  to  administer  them.  (United 
States  z^  Curtis,  107  U.  S.,  671.)  The  Comptroller  requires  them 
to  be  taken,  but  they  have  no  legal  force. 

Directors  Can  Act  Only  as  a  Board. — The  election  of  a  per- 
son as  a  director  does  not  constitute  him  an  agent  of  the  corpora- 


41 

tion  with  authority  to  act  separately  and  indepeudeutly  of  his  fel- 
low members.  It  is  the  board,  duly  convened  and  acting  as  a 
unit,  that  is  made  the  representative  of  the  bank.  The  assent  or 
determination  of  the  members  of  the  board  acting  separately  and 
individually  is  not  the  assent  of  the  corporation.  The  law  pro- 
ceeds upon  the  theory  that  the  directors  shall  meet  and  counsel 
with  each  other,  and  that  any  determination  affecting  the  associa- 
tion shall  be  arrived  at  and  expressed  only  after  a  consultation  at 
a  meeting  of  the  board  attended  by  a  quorum.  (^National  Bayik 
V.  Drake,  35  Kan.,  564.)  Frequently,  it  is  true,  a  director  does 
have  authority  to  bind  the  bank  when  acting  separately  and  apart 
from  the  others ;  but  in  such  case  he  does  not  derive  his  authority 
from  his  position  as  director,  but  from  the  circumstance  that  he 
has  been  authorized  by  the  board,  either  expressly  or  impliedly, 
to  act  as  the  agent  of  the  bank. 

"What  Constitutes  a  Board. — A  quorum  generally  consists  of 
a  majority  of  the  whole  board.  A  provision  to  this  effect  is  usuall}^ 
contained  in  the  articles  of  association  (see  form  of  articles  on  page 
198),  though  this  would  be  the  rule  in  the  absence  of  any  provision 
whatever  on  the  subject.  In  the  previous  editions  of  this  Digest 
the  opinion  was  expressed  that  it  would  be  competent  for  the 
stockholders  to  provide  that  a  less  number  than  a  majority  shall 
constitute  a  quorum,  and  we  still  believe  this  to  be  correct,  though 
the  Comptroller  of  the  Currency  takes  a  different  view.  The  point 
has  not  been  judicially  determined. 

Where  a  majority  is  required  to  constitute  a  quorum,  this  means 
a  majority  of  a  full  board,  and  not  merely  a  majority  of  those  who 
may  be  members  at  the  time.  Thus,  should  there  be  a  vacancy  in 
a  board  consisting  of  ten  members,  six  would  still  be  necessary  to 
make  a  quorum,  though  five  would  be  a  majority  of  the  present 
members.  Sometimes  the  articles  of  association  do  not  provide  for 
any  specific  number  of  directors,  but  provide  that  the  board  shall 
consist  of  not  less,  or  not  more,  than  a  certain  number,  or  both,  as 
for  instance,  "  The  board  of  directors  shall  consist'of  not  less, than 
five  and  not  more  than  ten  stockholders."  This  leaves  it  to  the 
stockholders  to  determine  at  each  annual  election  the  number 
which  shall  constitute  a  full  board  for  the  ensuing  year.  If.  in 
such  a  case,  the  stockholders  do  not  manifest  their  intention  by 
expressl}^  setting  it  forth  in  a  resolution,  it  is  to  be  gathered  from 
their  action  in  electing  a  certain  number  of  directors,  and  it  is  to 


42 

be  supposed  that  the  number  so  elected  was  intended  to  constitute 
the  board  for  the  year ;  and  the  effect  is  the  same  as  if  they  had 
expressly  provided  for  that  number  in  the  articles  of  association 
or  otherwise.  Vacancies  occurring  through  the  year  should, 
therefore,  be  filled  as  in  other  cases. 

Disqualification  and  Resignation. — It  would  seem  to  be  the 
proper  construction  of  the  law  that  where  a  director  becomes  dis- 
qualified, this  ipso  facto  vacates  his  place  in  the  board,  and  no  re- 
moval by  the  other  directors  is  necessary.  The  provision  that  the 
directors  are  to  hold  office  for  one  year,  does  not  require  a  director 
to  serve  for  the  whole  term  for  which  he  was  elected,  and  prohibit 
him  from  resigning  during  such  term,  but  he  may  resign  at  any 
time  during  the  year.  (Briggs  v.  Spalding,  141  U.  S.,  132.)  The 
apparent  purpose  of  the  provision,  in  regard  to  the  term  of  office,  is 
to  make  it  conform  to  the  time  of  the  new  election,  and  not  to  ab- 
solutely require  every  director  to  serve  the  full  term.  (Movius  v. 
Lee,  30  Fed.  Rep.,  298.)  The  resignation  of  a  director  should  be 
tendered  to  the  board,  and  not  to  the  shareholders.  As  the  presi- 
dent is  the  head  of  the  board,  it  may  be  tendered  to  him.  (Movius 
V.  Lee,  30  Fed.  Rep.,  298.)  It  is  the  more  orderly  and  proper 
way  to  put  the  resignation  in  writing,  but  an  oral  resignation 
tendered  to  the  president  is  sufficient.  (Briggs  v.  Spalding,  141 
U.  S.,  132.)  Where  the  president  is  granted  a  leave  of  absence  on 
account  of  ill  health,  it  is  not  incumbent  upon  him  to  tender  his 
resignation  as  a  director,  at  the  peril  of  otherwise  being  held  liable 
for  losses  that  may  occur  during  his  absence  through  the  mis- 
management of  the  bank.     {Id.') 

Liability  of  Directors. — Directors  who  violate  any  of  the 
provisions  of  the  law  can  be  held  personally  liable  for  the  loss 
resulting  to  the  bank  therefrom.  Thus,  where  they  make  a  loan  in 
excess  of  one-tenth  of  the  capital  stock  of  the  bank,  in  violation 
of  Section  520Q,  Revised  Statutes,  they  will  be  liable  to  the  bank 
for  all  damages  sustained  by  it  in  conseqvience  of  such  loan.  (See 
on  this  subject  note  to  Section  5239,  par.  118,  post.) 

The  degree  of  care  required  of  the  directors  is  that  which  men 
of  ordinary  prudence  would  exercise  under  similar  circumstances, 
and  in  determining  this  the  restrictions  of  the  banking  law  and 
the  usages  of  business  should  be  taken  into  account.  The  ques- 
tion is  ultimately  one  of  fact,  to  be  determined   under  all  the 


43 

circumstances,  (Briggs  v.  Spalding,  141  U.  S.,  132;  Movius  v. 
lyce,  30  Fed.  Rep.,  298.)  They  are  entitled  under  the  law  to 
commit  the  banking  business,  as  defined,  to  their  duly  authorized 
officers,  but  this  does  not  absolve  them  from  the  duty  of  reason- 
able supervision,  and  they  will  not  be  permitted  to  be  shielded 
from  liability  because  of  ignorance  or  wrong-doing,  if  such  ignor- 
ance is  the  result  of  gross  inattention.     (/^.) 

The  directors  of  a  National  bank  are  vested  with  a  sound  dis- 
cretion in  the  matter  of  requiring  or  not  the  officers  of  their  bank 
to  give  bond.  But  special  circumstances  may  exist  which  will 
render  them  personally  liable  if  they  fail  to  require  such  bonds. 
(Robinson  v.  Hall,  6^  Fed.  Rep.,  222.)  In  the  case  cited,  the 
directors  left  the  management  of  the  bank  for  more  than  three 
years  almost  wholly  to  its  cashier,  who  had  but  little  property,  and 
of  whom  they  required  no  bond ;  and  they  knowinglj'  permitted 
loans  to  be  made  to  individuals  and  firms  largely  in  excess  of  the 
amounts  allowed  by  law.  They  also  failed  to  record  mortgages 
given  to  secure  large  debts  due  the  bank,  even  after  thej'  were 
aware  of  its  insolvency,  and  erroneously  advised  an  examiner  who 
had  taken  charge  of  the  bank  that  it  was  not  necessar}-  to  record 
them :  Held,  That  they  were  personally  liable  for  the  losses  caused 
by  such  neglect  and  mismanagement,  and  the  frauds  and  defalca- 
tions of  the  cashier.  Directors  are  not  liable  for  concealing  from 
creditors  the  fact  of  the  bank's  embarrassment,  unless  that  embar- 
rassment is  such  as  to  imperatively  demand  the  bank's  suspension. 
(/<:/.)  But  perhaps  they  might  be  liable  for  withdrawing  their  own 
deposits  when  they  have  knowledge  of  the  bank's  embarrassment. 
(/^.)  A  National  bank  having  suspended  payment  the  directors 
issued  a  circular  stating  that  the  bank  was  entirely  solvent,  and 
invited  its  customers  to  make  deposits  with  it,  to  be  held  as  special 
deposits.  Afterwards  a  receiver  was  appointed  by  the  Comptroller 
of  the  Currency,  and  the  special  deposits  made  in  pursuance  of 
such  invitation  were  turned  over  to  him  :  Held,  That  the  directors 
were  individually  liable  for  the  amount  of  such  deposits.  (Miller 
V.  Howard,  95  Tenn.,  407.)     [See  also  Supplement.] 

If  directors  who  are  depositors  and  know  some  time  before  sus- 
pension that  that  event  is  inevitable,  and  that  the  bank  can  pay 
only  a  percentage  of  its  deposits,  and  yet  check  for  the  whole  of 
their  own  balances,  thereby  diminishing  the  percentage  to  which 
the  other  creditors  would  be  entitled,  they  defraud  to  this  extent 
the  creditors  whose  interests  they  were  relied  upon   to  protect, 


44 

and  will  be  held  to  strict  accountability.  (Robinson  v.  Hall,  63 
Fed.  Rep.,  222.)  (/(2^.)  A  National  bank  was  organized  with  a 
capital  of  ^60,000.  The  promoter  of  the  bank  took  380  shares  of 
stock  in  his  own  name  and  procured  the  defendants  to  be  directors 
as  well  as  a  person  to  be  elected  cashier  by  them.  The  directors 
were  not  acquainted  with  the  banking  business.  The  proposed 
cashier  was  known  to  the  directors,  at  least  by  reputation,  and 
was  supposed  by  them  to  be  competent  and  trustworthy  and  of 
considerable  experience  in  the  business,  and  they  had  full  confi- 
dence in  his  integrity  and  ability  to  take  charge  of  the  bank.  The 
cashier  acted  as  manager  of  the  loan  and  discount  business  of  the 
bank,  and  the  directors  merely  as  advisers,  when  applied  to.  The 
promoter  of  the  bank  knew,  and  the  other  stockholders  were  pre- 
sumed to  know,  that  the  directors  were  wholly  unused  to  the 
banking  business  :  Held,  That  the  directors  were  not  liable  for  the 
acts  of  the  cashier  in  violation  of  the  banking  law  done  without 
their  participation  or  knovdedge.  (Clews  v.  Barden,  36  Fed.  Rep., 
617.)  The  cashier  made  loans,  in  excess  of  10  per  cent,  of  the 
capital,  to  a  manufacturing  corporation  supposed  by  him  and  by 
the  "public  to  be  entirely  solvent.  None  of  the  directors  knew  of 
the  loans  when  made,  but  after  a  loan  of  $3,000  in  excess  of  the 
lawful  limit  had  been  made  the  cashier  informed  one  of  them  of 
such  a  loan,  and  was  by  him  advised  to  call  it  in  when  due ;  and 
thereafter  such  director's  advice  was  asked  as  to  a  further  discount 
to  the  same  corporation,  and  he  disapproved  of  it,  and  it  was  not 
made.  Afterwards  further  loans  or  discounts  were  made  to  the 
same  corporation  without  the  knowledge  or  consent  of  any  of  the 
directors.  About  eight  months  after  the  bank  commenced  busi- 
ness one  or  more  of  the  debtors  of  the  bank  failed,  and  the  directors 
thereupon  took  the  active  management  into  their  own  hands: 
Held,  That  none  of  the  directors  had  knowingly  violated,  or 
knov/ingly  permitted  to  be  violated,  any  of  the  provisions  of  the 
banking  law  and  were  not  liable  for  such  violation  by  the  cashier. 
{Id.) 

It  is  within  the  power  of  the  board  to  give  a  director  a  leave  of 
absence  on  account  of  ill  health,  and  if  frauds  are  committed  dur- 
ing his  absence  and  without  his  knowledge,  he  will  not  be  liable 
for  them.      (Briggs  v.  Spauhling,  141  U.  S,,  132.) 

There  have  been  comparatively  few  decisions  touching  the  duties 
and  liabilities  of  directors  of  National  banks ;  but  their  duties  and 
liabilities  are,  in  general,  not  different  from  those  of  directors  of 
other  corporations. 


45 

Annual    Meetings. — For   election   of  directors  the  number  of 

shares  represented  is  not  material  to  legality  of  a  meeting  properly 

called. 

30.    Vacancies  :  How  Filled. 

Section  5148. — Any  vacancy  in  the  board  shall  be  filled  by  appointment 
by  the  remaining  directors,  and  any  director  so  appointed  shall  hold  his 
place  until  the  next  election. 

It  would  seem  to  be  the  proper  construction  of  this  section,  that 
the  duty  of  filling  any  vacancy  in  the  board  is  obligatory  on  the 
remaining  directors,  and  is  not  merely  discretionary  with  them. 
The  power  is  conferred  upon  them  for  the  benefif  of  the  bank  and 
its  stockholders,  and  these  have  an  interest  in  having  the  power 
exercised. 

31,    Proceedings  Where  no  Election  is  Held. 

Section  5149. — If,  from  any  cause,  an  election  of  directors  is  not  made  at 
the  time  appointed,  the  association  shall  not  for  that  cause  be  dissolved,  but 
an  election  may  be  held  on  any  subsequent  day,  thirty  days'  notice  thereof 
in  all  cases  having  been  given  in  a  newspaper  published  in  the  city,  town,  or 
county  in  which  the  association  is  located ;  and  if  no  newspaper  is  published 
in  such  city,  town,  or  county,  such  notice  shall  be  published  in  a  newspaper 
published  nearest  thereto.  If  the  articles  of  association  do  not  fix  the  day  on 
which  the  election  shall  be  held,  or  if  no  election  is  held  on  the  day  fixed,  the 
day  for  the  election  shall  be  designated  by  the  board  of  directors  in  their  by- 
laws, or  otherwise;  or  if  the  directors  fail  to  fix  the  day,  shareholders  repre- 
senting two-thirds  of  the  shares  may  do  so. 

Shareholders'  Control. — The  presence  of  this  section  in  the 
law  shows  the  importance  attached  by  the  legislators  to  the  exer- 
cise of  control  over  the  management  of  the  bank  by  stockholders. 
Precaution  is  taken  that  the  annual  election  shall  not  be  neglected 
by  the  directors  who  might  perhaps  desire  to  hold  over.  If  the 
election  is  from  any  cause  omitted,  the  directors  have  the  power 
to  cause  an  election  to  be  held  on  a  subsequent  day  by  giving 
notice  by  publication.  A  failure  to  name  a  day  in  the  articles  of 
association  may  be  remedied  by  the  directors  in  the  by-laws,  or 
otherwise.  But  in  the  event  of  the  failure  of  directors  to  fix  a  day, 
either  when  no  day  has  been  fixed  in  the  articles  of  association  or 
by-laws,  or  when  election  has  not  been  held  on  the  day  fixed,  two- 
thirds  of  the  stock  may  fix  a  day. 

When  No  Election  Held.— It  would  seem,  therefore,  that 
unless  two-thirds  of  the  stock  were  dissatisfied   with   an  existing 


46 

board  of  directors,  sucli  board,  by  neglecting  to  have  elections 
held,  might  retain  office  for  an  indefinite  period.  The  Comp- 
troller might,  perhaps,  require  them  to  renew  their  oaths  each 
year,  or  he  might  construe  the  law  to  be  mandatory  as  to  annual 
elections ;  in  which  case  the  bank  would  have  to  be  guided  by  the 
Comptroller's  construction,  unless  it  wished  to  contest  the  matter 
in  the  courts  or  have  the  question  decided  by  some  law  officer  of 
the  Government.  In  the  event  of  any  difference  of  opinion  upon 
a  legal  point  between  a  bank  and  the  Comptroller,  the  bank  can 
request  that  it  be  referred  to  the  Secretary  of  the  Treasury  or  the 
Attornej^-General  of  the  United  States  for  an  opinion. 

33.    The  President  Must  be  a  Director. 

Section  5150. — One  of  the  directors,  to  be  chosen  by  the  board,  shall  be 
the  president  of  the  board, 

Ex-Officio  Powers. — The  president  of  the  board  of  directors 
is  the  presiding  officer  of  the  board,  but  otherwise  his  ex-officio 
powers  are  not  greater  than  those  of  any  other  director,  except 
that,  as  the  head  of  the  board,  he  may  bring  suits  in  behalf  of  the 
bank,  and  in  proceedings  against  the  bank  legal  process  may  be. 
served  upon  him  when  it  might  not  be  proper  to  serve  it  upon  any 
other  director.  But  usually  he  is  also  the  chief  executive  officer 
of  the  bank,  and  has  large  powers  delegated  to  him  by  the  board. 

Vested  Powers. — It  is  important  to  remember,  however,  that 
his  authority  as  chief  managing  agent  of  the  bank  is  not  inherent 
in  his  office,  but  is  vested  in  him  by  the  board  of  directors,  either 
expressly  or  by  implication,  and  that  in  his  case,  as  well  as  in  that 
of  any  other  officer  or  agent,  it  is  necessary  to  show  that  the 
requisite  authority  has  been  conferred  by  the  board.  The  powers 
of  the  president  will  accordingly  vary  in  different  cases,  and  the 
powers  of  some  presidents  will  be  much  greater  than  those  of 
others.  The  directors  have  the  right  to  remove  the  president  at 
any  time.  (Taylor  v.  Hutton,  43.  Barb.,  195.)  And  they  have 
this  power  though  the  bank  has  never  legally  adopted  any  by-laws. 
(/(/.)  The  president  has  the  power  to  employ  counsel  and  manage 
the  litigation  of  a  bank,  in  the  absence  of  any  order  of  the  board 
of  directors  depriving  him  of  such  power.  (Citizens'  National 
Bank  of  Kingman  v.  Berry,  53  Kan.,  696.)  And  he  has,  by  virtue 
of  his  office,  authority  to  assign  a  judgment  owned  by  the  bank; 
(Guernsey  v.  Black  Diamond  Coal  and  Mining  Company,  99  Iowa, 


47 

471.)  or  to  compromise  or  release  a  debt  due  to  the  bank.  (Far- 
mers' National  Bank  v.  Templeton,  40  S.  W.  Rep.,  412.)  He 
lias  no  power  inherent  in  his  office  to  bind  the  bank  on  the  execu- 
tion of  a  note  in  its  name ;  but  power  to  do  so  may  be  conferred 
on  him  by  the  board  of  directors,  either  expressly  by  resolution  to 
that  effect,  or  by  subsequent  ratification,  or  by  acquiescence  in 
transactions  of  a  similar  nature  of  which  the  directors  have  notice. 
(National  Bank  of  Commerce  v.  Atkinson,  55  Fed.  Rep.,  465.) 
But  it  is  within  the  scope  of  the  implied  power  of  the  president  to 
indorse  negotiable  paper  in  the  ordinary  transaction  of  the  bank's 
business,  and  a  special  authority  for  this  purpose  need  not  be  con- 
ferred by  the  board  of  directors.  (United  States  National  Bank 
V.  First  National  Bank  of  Little  Rock,  79  Fed.  Rep.,  296.)  Where 
the  president  exercises  the  functions  of  cashier  and  is  the  sole 
managing  officer  of  the  bank,  the  bank  will  be  bound  by  such  acts 
:)f  his  as  belong  vh^tute  officii  to  the  office  of  cashier.  (Simons  v. 
Fisher,  55  Fed.  Rep.,  905.)  Where  the  president  requests  the 
cashier  to  make  advances  to  a  minor,  verbally  promising  that  he 
will  see  them  repaid,  he  is  liable  to  the  bank  for  any  loss  sustained 
by  reason  of  such  loans,  as  having  been  guilty  of  a  breach  of 
trust.  (Brown  v.  Farmers'  and  Merchants'  National  Bank,  88 
Tex.  265.) 

ZZ'    Individual  Liability  of  Shareholders. 

Section  5  i  5  i  . — The  shareholders  of  every  National  banking  association 
shall  be  held  individually  responsible,  equally  and  ratably,  and  not  one  for 
another,  for  all  contracts,  debts,  and  engagements  of  such  association,  to  the 
extent  of  the  amount  of  their  stock  therein,  at  the  par  value  thereof,  in  addi- 
tion to  the  amount  invested  in  such  shares ;  except  that  shareholders  of  any 
banking  association  now  existing  under  State  laws,  having  not  less  than  five 
millions  of  dollars  of  capital  actually  paid  in,  and  a  surplus  of  twenty  per 
centum  on  hand,  both  to  be  determined  by  the  Comptroller  of  the  Currency, 
shall  be  liable  only  to  the  amount  invested  in  their  shares ;  and  such  surplus 
of  twenty  per  centum  shall  be  kept  undiminished,  and  be  in  addition  to  the 
surplus  provided  for  in  this  Title ;  and  if  at  any  time  there  is  a  deficiency  in 
such  surplus  of  twenty  per  centum,  such  association  shall  not  pay  any  divi- 
dends to  its  shareholders  until  the  deficiency  is  made  good ;  and  in  case  of 
such  deficiency,  the  Comptroller  of  the  Currency  may  compel  the  association 
Jo  close  its  business  and  wind  up  its  affairs  under  the  provisions  of  chapter 
four  of  this  Title. 

For  What   Liabilities  of  the   Bank  Shareholders  are  Re- 
sponsible.—The  liabiUty  is  not  contractional,  but  exists  by  force 


48 

of  the  statute.  (First  National  Bank  of  Concord  v.  Hawkins,  35 
U.  S.  App.,  747.)  It  is  not  limited  in  anywise  by  the  provision  in 
Section  5234  that  the  receiver  may,  if  necessary  to  pay  the  ^'debts^^ 
of  the  bank,  enforce  the  individual  liability  of  the  stockholders ; 
but  the  word  "  debts'"  in  the  latter  section,  includes  all  the  liabili- 
ties of  the  bank  specified  in  this  section.  (Stanton  v.  Wilkeson, 
8  Benedict,  357  )  But  it  is  restricted  to  such  contracts,  debts,  and 
engagements  of  the  bank  as  have  been  dul}^  contracted  in  the 
ordinary  course  of  business.  (Richmond  27.  Irons,  121  U.  S.,  27; 
Schrader  v.  Manufacturers'  National  Bank,  133  U.  S.,  67.)  The 
liability  of  the  stockholders,  therefore,  cannot  be  enforced  to  pay 
the  claims  of  creditors  on  new  contracts  made  after  the  bank  has 
been  placed  in  voluntary  liquidation.  (Z^^)  Thus,  where  a  bank 
had  gone  into  liquidation  and  certain  creditors  took  in  payment  of 
their  claims  some  of  the  paper  of  the  bank,  and  the  individual 
notes  of  the  president  indorsed  or  guaranteed  in  the  name  of  the 
bank,  it  was  held  by  the  Supreme  Court  of  the  United  States  that 
the  stockholders  could  not  be  subjected  to  an  individual  liability 
for  the  payment  of  such  claims.     (/'^^'•) 

Extent  of  the  Liability. — The  amount  which  each  shareholder 
is  liable  to  contribute  bears  the  same  proportion  to  the  whole 
amount  of  the  deficit  that  his  own  stock  bears  to  the  whole  amount 
of  the  capital  stock  at  its  par  value.  (United  States  v.  Knox,  102 
U.  S.,  422.)  If  there  are  insolvent  shareholders,  the  solvent  share- 
holders can  not  be  required  to  contribute  more  than  their  propor- 
tion, in  order  to  make  good  the  deficiency.  (Z^/-)  The  liability 
of  the  shareholder  is  for  interest  on  the  debts  of  the  bank  as  well 
as  for  the  principal  thereof.     (Richmond  v.  Irons,  121  U.  S.,  27.) 

The  assessment  itself  bears  interest  from  the  date  of  the  order. 

(Casey  v.  Galli,  94  U.  S.,  673.)     [See  also  Supplement.] 

Deceased  Stockholder. — This  liability  survives  against  the 
representatives  of  a  deceased  shareholder,  and  adheres  to  his  es- 
tate after  his  death,  though  he  dies  before  the  insolvency  of  the 
bank  occurs.  (Richmond  v.  Irons,  121  U.  S.,  27;  Davis  v.  Weed, 
44  Conn.,  569;  Wickham  v.  Hull,  60  Fed.  Rep.,  326.)  And  the 
fact  that  the  title  to  the  stock  of  a  deceased  shareholder  vests  in 
his  administrator  does  not  relieve  the  estate  from  the  burden  of  an 
assessment.  (Davis  v.  Weed,  44  Conn.,  supra.')  Nor  will  the 
fact  that  the  administration  is  complete,  and  all  the  assets  have 


49 

been  distributed,  defeat  an   action  brought  to  recover  the  assess- 
ment.    {Id.) 

Married  Women. — When  the  law  of  the  State  where  the  con- 
tract is  made  permits  married  women  to  become  owners  of  stock, 
they  will  be  subject  to  all  the  liabilities  of  stockholders.  (Bundy 
V.  Cocke,  128  U.  S.,  185;  Keyser  v.  Hitz,  133  U.  S-,  438;  Jji  Re 
National  Bank  of  St.  Albans,  49  Fed.  Rep.,  120;  Anderson  v.  Line, 
14  Fed.  Rep.,  405.)  And  it  has  been  held  tliat  where  a  married 
woman  is  by  the  State  law  capable  of  holding  stock  in  a  National 
bank  in  her  own  right,  she  is  liable  thereon  under  this  section, 
though  the  law  of  the  State  does  not  authorize  married  women  to 
bind  themselves  by  contracts  for  the  payment  of  money ;  for  the 
law  annexes  her  liability  of  its  own  force,  and  no  capacity  to  act 
on  her  part  is  required.     (Witters  v.  Sowles,  35  Fed.  Rep.,  640.) 

The  purchase  of  National  bank  stock  by  a  married  woman  is  not 
a  ' '  contract ' '  within  the  terms  of  a  statute  providing  that  during 
coverture  no  woman  shall  be  capable  of  making  an}^  contract  to 
affect  her  real  and  personal  estate  without  the  consent  of  her  hus- 
band ;  and  she  will  be  liable  for  an  assessment,  although  the  stock 
was  purchased  without  the  written  consent  of  her  husband.  (Rob- 
inson V.  Turrentine,  59  Fed.  Rep.,  554.)  In  Vermont  a  married 
woman  is  competent  to  become  a  stockliolder  in  a  National  bank, 
and  to  contract  to  charge  her  separate  property  with  the  payment 
of  any  liability  which  is  implied  from  entering  into  that  relation. 
(Witters  v.  Sowles,  38  Fed.  Rep.,  700.)  And  in  the  District  of 
Columbia,  a  married  woman  may  become  a  holder  of  stock  in  a 
National  bank  and  assume  all  the  liabilities  of  such  a  shareholder, 
although  the  consideration  maj^  have  proceeded  wholly  from  the 
husband.     (Keyser  v.  Hitz,  133  U.  S.,  438.) 

Assignment  for  Creditors. — Defrauding  Creditors. — In  a 
suit  to  enforce  the  individual  liability  of  a  stockholder,  it  is  not 
material  that  the  person  who  transferred  the  stock  to  such  stock- 
holder did  so  for  the  purpose  of  concealing  his  propert}-  and  de- 
frauding his  creditors ;  there  is  no  connection  between  the  liability 
of  the  stockholder  and  an  alleged  fraudulent  intent  on  the  part  of 
the  person  from  v»'hom  the  title  to  the  stock  was  acquired.  (Key- 
ser V.  Hitz,  133  U.  S.,  433-)  And  conversely  the  fact  that  one  is 
a  stockholder  and  director  in  an  insolvent  National  bank,  and  in- 
dividually liable  for  the  debts  of  the  bank  to  the  amount  of  his 
4 


50 

stock,  will  not  operate  so  as  to  prevent  him  from  making  an  other- 
wise lawful  disposition  of  his  property  for  the  benefit  of  his  credi- 
tors.    (Peters  et  al.  v.  Bain,  133  U.  S.,  670.) 

Registered  Owner  Liable. — Asageneral  rule,  the  Comptroller 
of  the  Currency  and  the  receiver,  when  they  come  to  enforce  the 
individual  liability  of  the  stockholders,  are  not  required  to  look 
beyond  the  stock-books,  but  may  hold  all  persons  liable  as  stock- 
holders who  appear  on  the  books  as  such.  In  order  to  relieve 
himself  from  liability  every  stockholder  selling  his  stock  must  have 
the  transfer  properly  registered;  for  while,  as  between  the  parties, 
the  sale  is  complete  and  the  title  passes  when  the  seller  delivers 
to  the  buj'er  the  certificates  with  a  proper  power  of  attorney  to 
make  the  transfer,  the  corporation  and  its  creditors  are  not  affected 
by  the  transaction  until  it  is  noted  on  the  books,  or  until,  at  least, 
the  seller  shall  have  done  all  that  he  reasonably  can  do  to  have  it 
so  noted.  Accordingly,  where  a  stockholder  sold  certain  stock 
several  months  before  the  insolvency  of  the  bank,  but  the  transfer 
was  not  made  on  the  books  till  the  date  of  the  bank's  failure,  it 
was  held  that  the  stockholder  incurred  the  statutory  liability, 
(Richmond  v.  Irons,  121  U.  S.,  27.)  But  the  seller,  when  he  has 
delivered  the  certificates  with  a  suitable  power  of  attorney  to  the 
proper  ofiicer  of  the  bank,  and  requested  him  to  make  the  trans- 
fer on  the  books,  will  not  be  responsible  for  the  failure  of 
such  officer  to  actually  make  the  entry  if  he  has  had  no  reason  to 
suppose  that  this  was  not  done  as  directed.  (Whitney  v.  Butler, 
118  U.  S.,  655  ;  Cox  V.  Elniendorf,  97  Tenn.,  518.)  "The  position 
of  the  seller  in  such  case  is  analogous  to  that  of  a  grantor  of  a 
deed  deposited  in  the  proper  office  to  be  recorded.  The  general 
rule  is,  that  the  deed  is  considered  as  recorded  from  the  time  of 
such  deposit."  Therefore,  where  a  shareholder  of  a  National  bank 
made  a  bona-fide  sale  of  his  stock  and  went  with  the  purchaser  to 
the  bank,  indorsed  the  certificate,  and  delivered  it  to  the  cashier  of 
the  bank,  with  directions  to  make  the  transfer  on  the  books,  it  was 
held  he  had  done  all  that  is  incumbent  upon  him  to  discharged 
his  liability,  and  that  he  was  not  liable  upon  the  subsequent 
suspension  of  the  bank,  for  an  assessment  made  by  the  Comptroller 
of  the  Currency,  though  the  cashier  failed  to  make  the  transfer. 
(Hayes  v.  Shoemaker,  39  Fed.  Rep.,  319)  So,  where  a  stock- 
holder, nearly  a  year  before  the  failure,  had  sold  his  stock  to  a 
broker  for  an  undisclosed  principal,  and  indorsed  the  same,  and 


51 

requested  the  broker  to  inform  the  cashier  of  the  transaction,  and 
to  have  the  stock  transferred ;  and  the  broker  accordingly  handed 
the  stock  to  the  cashier,  gave  him  the  necessary  information  and 
requested  him  to  make  the  transfer,  which  the  cashier  promised  to 
do ;  it  was  held  that  iu  requesting  the  cashier  to  make  the  transfer 
the  broker  acted  as  the  seller's  agent,  and  that  the  latter  did  all 
that  was  required  of  him  as  a  prudent  business  man,  and  could  not 
be  held  liable  as  a  stockholder,  though  the  transfer  was  not  in  fact 
made.  (Young  v.  McKay,  50  Fed.  Rep. ,  594.)  But  where  the  seller 
delivers  the  stock  certificate  and  power  of  attorney  to  the  buyer  rely- 
ing upon  the  promise  of  the  latter  to  have  the  necessary  transfer 
made,  this  will  not  be  sufficient  to  discharge  him.  And  v/here  the 
sale  is  made  to  an  officer  of  the  bank,  and  the  certificates  and  power 
of  attorney  are  delivered  to  him  and  not  as  such  officer,  but  as  vendee, 
the  seller  will  continue  liable  until  the  entry  is  made.  (Richmond 
V.  Irons,  121  U.  S.,  27.)  Of  course,  a  person  whose  name  is  put 
upon  the  stock-books  without  his  knowledge  or  consent  can  not  be 
held  liable  as  a  stockholder ;  but  it  has  been  decided  that  where 
the  person  to  whom  the  stock  was  transferred  was  a  director  of 
the  bank,  and  was  concerned  in  the  management  of  its  affairs,  he 
was  to  be  presumed  to  have  knowledge  of  the  fact  that  the  stock 
stood  in  his  name,  and,  as  he  had  not  repudiated  the  transfer  to 
himself,  he  was  liable  as  the  holder  of  such  stock.  (Brown  v. 
Finn,  142  U.  S.,  56.)  And  where  one  endorses  a  check  payable  to 
his  order,  which  discloses  upon  its  face  that  it  is  for  dividends  on 
stock  standing  in  his  name  on  the  books  of  the  bank,  he  is  estopped 
to  deny  that  he  is  the  owner  of  the  stock  upon  w^hich  the  dividends 
are  declared.  (Keyser  v.  Hitz,  133  U.  S.,  433)  If  he  denies 
owning  the  stock,  he  should  restore  the  dividend  to  the  bank. 
(Finn  v.  Brown,  142  U.  S.,  56.)  And  if  the  dividend  turns  out  to 
be  a  fraudulent  one,  he  will  not  have  freed  himself  from  liability 
for  it  by  giving  his  check  for  it  on  the  bank  to  the  alleged  true 
owner.  (Z^^.)  Where  certificates  are  issued  to  a  subsequent  pur- 
chaser in  lieu  of  the  certificates  of  the  prior  owner,  such  purchaser 
will  be  liable  as  a  stockholder  though  the  by-laws  of  the  bank 
requiring  the  transfer  to  be  registered  were  not  observed.  (Laing 
V.  Burley,  loi  111.,  591.)  Where  certificates  of  stock  are  made  out 
to  the  holder  as  the  absolute  owner  thereof,  and  he  so  appears  on 
the  books  of  the  bank,  he  will  not  be  permitted  to  show  in  an 
action  against  him  to  recover  an  assessment  on  the  stock  that  he 
held  the  same  as  trustee.     (L^ewis  v.  I^evitz,  74  Fed.  Rep.,  381.) 


52 

In  the  case  of  an  agreement  made  with  a  subscriber  to  the  stock 
of  a  National  bank  to  take  the  stock  from  him  at  a  certain  time,  at 
his  option,  the  person  so  agreeing  to  purchase  the  stock  will  be 
liable  to  the  other  for  the  amount  of  an  assessment  made  b}'  the 
Comptroller  of  the  Currency  upon  the  stock  after  the  tender  thereof 
in  pursuance  of  the  contract.  (Gay  v.  Dare,  103  Cal  ,  454.)  While 
one  who  voluntarily  appears  upon  the  books  of  a  National  bank  as 
a  stockholder  will  be  precluded  from  showing  that  he  is  not  in 
fact  a  stockholder,  yet,  where  it  is  admitted  that  the  stock  is 
owned  by  another,  and  judgment  obtained  against  him  for  the 
amount  of  the  assessment  upon  such  stock,  the  person  in  whose 
name  it  stands  cannot  be  held  liable  thereon.  (Yardly  v.  Wilgus, 
56  Fed.  Rep.  965.) 

Subscribers  to  New  Stock. — A  stockholder  who  elects  to 
subscribe  for  shares  of  an  increase  and  actually  pays  for  the  same, 
and  is  registered  as  holding  the  additional  shares  on  the  books  of 
the  bank,  thereby  becomes  a  shareholder,  and  his  failure  to  call 
for  his  certificate  of  stock  makes  no  difference  in  his  liability  as 
such.  (Thayer  v.  Butler,  141  U.  S.,  234.)  But  the  fact  that  the 
subscriber  for  new  shares  (which  were  never  issued)  received  a 
dividend  on  old  shares  transferred  to  him  without  his  knowledge 
in  place  of  new  shares,  does  not  estop  him  from  denying  his  lia- 
bility as  a  shareholder,  where  such  dividend  was  received  in  the 
belief  that  it  was  paid  to  him  by  virtue  of  his  subscription  to  the 
new  stock.  (Stephens  v.  Follett,  43  Fed.  Rep.,  842.)  And  one 
who  subscribes  and  pays  for  a  specific  number  of  shares  of  a  pro- 
posed increase  of  stock,  which  is  in  fact  never  issued,  and  to  whom 
the  bank  officials  transfer  old  stock  instead,  without  his  know- 
ledge and  consent,  is  not  to  be  deemed  a  shareholder  as  to  the 
stock  so  issued  to  him.  (Stephens  v.  Follett,  43  Fed.  Rep.,  842.) 
But  the  subscribers  may  be  estopped  to  dispute  the  legality  of  in- 
crease by  accepting  certificates  for  the  stock,  receiving  dividends, 
and  giving  proxies  to  vote  upon  the  stock.  (Tillinghast  v.  Bailey, 
86  Fed.  Rep.,  46  ;  Latimer  v.  Burd,  76  Fed.  Rep.,  536.)  And  the 
certificate  of  the  Comptroller  of  the  Currency  authorizing  the  in- 
crease of  the  capital  stock  of  a  National  bank  is  conclusive  upon 
the  subscribers  to  such  new  stock  when  sued  for  an  assessment 
laid  upon  the  same.     (M) 

In  McFarlin  v.  First  National  Bank  (68  Fed.  Rep.,  868),  the 
plaintiffs  .subscribed  for  certain  shares  in  a  bank  to  increa.se  the 


53 

capital,  and,  after  paying  installments  thereon,  consented  that  the 
bank  be  consolidated  with  a  National  bank,  and  that  the  capital 
ot"  the  latter  be  increased,  and  that  their  subscriptions  should  stand 
as  subscriptions  to  the  increased  capital  of  the  National  bank  and 
paid  installments  on  their  subscriptions.  Some  preliminar)^  steps 
were  taken  by  the  National  bank  to  increase  its  stock,  but  the 
Comptroller  of  the  Currency  refused  to  consent  to  the  full  increase, 
and  before  the  amount  of  increase  allowed  by  him  was  paid  in, 
and  a  certificate  therefor  issued  by  him,  the  National  bank  was 
placed  in  the  hands  of  a  receiver:  Held,  That  plaiutifis  never  be- 
came stockholders  in  the  National  bank. 

Liability  of  Pledgee, — A  person  who  holds  stock  merely  as 
collateral  security  is  liable  as  the  owner  of  the  stock,  if  he  appears 
upon  the  books  of  the  bank  as  such.  (National  Bank  v.  Case,  99 
U.  S.,  628  ;  Moore  7A  Jones,  3  Woods,  53 ;  Hale  v.  Walker,  31  lovra, 
344;  Wheelock  v.  Kost,  77  111.,  296;  but  see  Magruder  v.  Colston, 
44  Md.,  349.)  "  For  this  several  reasons  are  given.  One  is  that 
he  is  estopped  from  denying  his  liability  by  voluntarily  holding 
himself  out  to  the  public  as  the  owner  of  the  stock,  and  his  denial 
of  ownership  is  inconsistent  with  the  representations  he  has  made; 
another  is,  that  by  taking  the  legal  title  he  has  released  the  former 
owner ;  and  a  third  is,  that  after  having  taken  the  apparent  owner- 
ship and  thus  become  entitled  to  receive  dividends,  vote  at  elections, 
and  enjoy  all  the  privileges  of  ownership,  it  would  be  inequitable 
to  allow  him  to  refuse  the  responsibilities  of  a  stockholder."  And 
so  long  as  the  stock  continues  to  stand  in  his  name  the  pledgee 
will  be  liable  as  a  stockholder,  though  the  loan  has  been  repaid, 
and  the  stock  certificate  surrendered,  with  an  executed  power  of 
attorney  to  make  the  transfer.  (Bowdell  v.  Farmers'  and  Mer- 
chants' National  Bank,  14  Bankers''  Magazine,  378 ;  2  Nat.  Bk, 
Cases,  146.)  But  a  pledgee,  acting  in  good  faith,  and  without  any 
fraudulent  intention,  has  the  perfect  right  to  shun  such  liability, 
and  may  have  the  control  of  the  stock  tor  the  purposes  of  security 
without  being  made  liable  as  a  registered  shareholder.  (Anderson 
V.  Philadelphia  Warehouse  Company,  iii  U.  S.,  479-)  IQ  the 
case  cited,  the  pledgee,  the  Philadelphia  Warehouse  Company, 
with  the  knowledge  and  consent  of  the  pledgor  and  the  officers  of 
the  bank,  had  had  the  stock  transferred  on  the  books  of  the  bank 
to  an  irresponsible  person,  one  of  its  employees,  from  whom  it  took 
an  irrevocable  power  of  attorney  for  the  sale  and  transfer  of  the 


54 

stock.  The  dividends  were  paid  regularly  to  the  pledgor,  and  the 
pledgee  never  received  any  dividends,  and  never  acted  as  a  share- 
holder. At  the  time  of  the  transfer  the  bank  was  entirely  solvent, 
but  afterwards  it  failed.  Upon  these  facts  it  was  decided  that  the 
pledgee  was  not  liable  for  an  assessment  made  upon  the  share- 
holders of  the  bank.  It  may  be  said,  therefore,  upon  the  au- 
thority of  this  case,  that  where  a  National  bank  is  solvent,  a  per- 
son taking  its  shares  as  collateral  security,  when  acting  in  good 
faith,  may  avoid  incurring  a  liability  in  respect  to  such  shares  by 
having  them  transferred  on  the  books  of  the  bank,  and  certificates 
therefor  issued  to  some  third  person,  from  whom  a  power  of  attor- 
ney to  transfer  the  stock  can  be  taken.  But  in  such  case  the 
officers  of  the  bank  should  be  fully  advised  of  the  character  of  the 
transaction,  and  the  pledgee  should  receive  no  dividends  on  the 
stock  or  exercise  any  of  the  rights  of  a  shareholder,  and  should 
not  pretend  to  be,  or  permit  himself  to  be  held  out  as,  anything 
more  than  a  mere  pledgee.  In  Beall  v.  Essex  Savings  Bank  (67 
Fed.  Rep.,  816),  it  was  held  by  the  United  States  Circuit  Court  of 
Appeals,  that  where  the  stock  is  transferred  as  collateral  security, 
and  the  fact  that  it  is  held  only  as  such  security  appears  upon  the 
transfer  book  of  the  bank,  the  person  b}^  whom  it  so  held  will  not 
be  liable  to  an  assessment  upon  the  stock  in  case  of  the  failure  of  the 
bank.  And,  in  Pauly  v.  State  I^oan  and  Trust  Company,  (165  U.S., 
606),  it  was  held  by  the  Supreme  Court  of  the  United  States  that 
one  to  whom  stock  of  a  National  bank  is  transferred  upon  the 
books  of  the  bank  "  as  pledgee  "  is  not  liable  as  a  stockholder. 
The  Court  said : 

"  It  is  true  that  one  who  does  not  in  fact  invest  his  moneys  in  such 
shares,  but  who,  although  receiving  them  simply  as  collateral 
security  for  debts  or  obligations,  holds  himself  out  on  the  books 
of  the  association  as  true  owner,  may  be  treated  as  the  owner,  and 
therefore,  liable  to  assessment,  when  the  association  becomes 
insolvent  and  goes  into  the  hands  of  a  receiver.  But  this  is  upon 
the  ground  that  by  allowing  his  name  to  appear  upon  the  stock  list 
as  owner  he  represents  that  he  is  such  owner;  and  he  will  not  be 
permitted,  after  the  bank  fails,  and  when  an  assessment  is  made, 
to  assume  any  other  position  as  against  creditors.  If,  as  between 
creditors  and  the  person  assessed,  the  latter  is  not  held  bound  by 
that  representation,  the  list  of  shareholders  required  to  be  kept  for 
the  inspection  of  creditors  and  others  would  lose  most  of  its  value. 
•But  this  rule  can  have  no  just  application  v,^hen,  as  in  this  case. 


55 

the  creflitors  were  informed  by  that  list  that  the  party  to  whom 
certificates  were  issued  was  not  in  fact,  and  did  not  assume  to  be, 
the  owner  of  the  shares  represented  by  them,  but  was  and  assumed 
to  be  only  a  pledgee  having  no  general  property  in  the  thing 
pledged,  but  only  a  right,  upon  default,  to  sell  in  satisfaction  of 
the  pledgor's  obligation.  Upon  inspecting  the  stock  registry,  or 
any  list  of  shareholders  or  of  transfers  kept  by  the  bank,  creditors 
will  know  that  they  cannot  regard  a  pledgee  as  the  actual  owner." 
And,  of  course,  a  pledgee  who  does  not  appear  by  the  books  of 
the  bank  or  otherwise  to  be  the  owner,  is  not  liable  for  an  assess- 
ment upon  the  shares  on  the  insolvency  of  the  bank.  (Welles  v, 
Larrabee  et  al.,  36  Fed.  Rep.,  866.)  If  a  person  receives  shares  of 
the  stock  of  a  National  bank  as  collateral  security  for  a  debt  due 
to  him  from  the  owner,  with  a  power  of  attorney  authorizing  him 
to  transfer  the  same  on  the  books  of  the  bank,  and  he  in  good 
faith  causes  the  shares  to  be  transferred  on  such  books  to  another, 
under  an  agreement  that  they  are  to  be  held  as  security  for  the 
debt  due  from  the  real  owner  to  the  creditor,  he  will  not  be 
treated  as  a  shareholder  within  the  meaning  of  this.  (Nat.  Park 
Bank  of  the  City  of  New  York  v.  Harmon,  25  C.  C.  A.,  214;  79 
Fed.  Rep.,  891.)     [See  also  Supplement.] 

Transfer  for  the  Purpose  of  Avoiding  Liability. — The  right 
of  creditors  of  a  National  bank  to  look  to  the  individual  liability 
of  the  shareholders,  to  the  extent  indicated  by  the  statute,  for  its 
contracts,  debts  and  engagements,  attaches  when  the  bank  becomes 
insolvent ;  and  the  shareholder  may  not,  b}^  transferring  bis  stock, 
compel  creditors  to  surrender  this  security  as  to  him,  and  force 
the  receiver  and  creditors  to  look  to  a  person  to  whom  his  stock 
has  been  transferred.  (Stuart  v.  Hayden,  169  U-  S.,  i.)  The 
real  owner  of  the  stock  cannot  escape  liability  by  having  it  trans- 
ferred on  the  books  into  the  name  of  another  person.  (Davis  v. 
Stevens,  17  Blatchford,  259;  National  Bank  v.  Case,  99  U-  S-  628; 
Stuart  V.  Hayden,  169  U.  S.,  i.)  And  where  for  the  purpose  of 
avoiding  liability,  a  shareholder  in  a  bank  which  is  in  a  failing 
condition,  transfers  his  stock  to  a  person  unable  to  respond  to  the 
assessment,  the  transfer  may  be  set  aside  as  a  fraud  upon  the 
creditors,  and  the  transferror  held  liable  as  a  stockholder.  (Bowdeu 
V.  Johnson,  107  U.  S.,  251.)  And  after  abank  has  become  insolv- 
ent, and  has  closed  its  doors  for  business,  its  shareholders'  liability 
to  creditors  is  so  fixed  that  any  transfer  of  their  shares  must  be 


56 

held  fraudulent  and  inoperative  as  against  the  creditors  of  the 
bank.  (Irons  v.  Manufacturers'  National  Bank  et  al.,  17  Fed. 
Rep.,  308.)  Moreover,  if  the  stockholder  has  reason  to  apprehend 
that  the  bank  is  in  a  failing  condition,  he  cannot  escape  liability 
by  transferring  the  stock  to  a  person  financially  irresponsible. 
(Baker  v.  Reeves,  85  Fed.  Rep.^  837.}  And  this  is  so,  even  when 
he  acts  in  good  faith.  (Stuart  v.  Hayden,  169  U.  S.  i.)  On  the 
other  hand,  if  the  bank  be  solvent  at  the  time  of  the  transfer,  that 
is,  able  to  meet  its  existing  contracts,  debts  and  engagements,  the 
motive  with  which  the  transfer  is  made  is  immaterial,  as  a  transfer 
under  such  circumstances  does  not  impair  the  security  given  to 
the  creditors.  (/'''.)  In  order  that  the  transferror  may  be  held 
liable  it  is  not  necessary  that  he  should  have  had  actual  knowledge 
of  the  insolvency  of  the  bank ;  it  is  sufiicient  if  he  had  good 
ground  to  apprehend  the  failure  of  the  bank,  and  made  the  transfer 
to  an  irresponsible  person,  with  intent  to  relieve  himself  from 
individual  liability.  (Cox  v.  Montague,  78  Fed.  Rep.,  845.) 
Where  stock  has  been  fraudulently  transferred  for  the  purpose  of 
avoiding  liability  both  the  transferror  and  the  transferee  are  liable 
for  the  assessment,  (Baker  v.  Reeves,  85  Fed.  Rep.,  837.)  But 
in  an  action  brought  by  the  receiver  the  transferees  of  the  stock 
cannot  by  cross-bill  obtain  relief  against  the  transferror  for  having 
defrauded  them  in  the  sale  of  the  stock.  (Stuart  z'  Hayden,  169 
U.  S.  I.)  The  receiver  is  the  proper  party  to  maintain  a  suit  in 
behalf  of  the  creditors  of  the  bank  to  set  aside  a  transfer  of  stock 
made  by  a  stockholder  for  the  purpose  of  escaping  liability  as  such 
stockholder.     (/^^.) 

Purchase  in  Name  of  Infant. — One  who  buys  stock  of  a  Na- 
tional bank  in  the  name  of  an  infant  will  be  liable  for  an  assess- 
ment, since  the  infant  is  incapable  of  binding  himself  as  a  stock- 
holder, (Foster  v.  Chase,  75  Fed.  Rep.,  797.)  And  the  ratifica- 
tion by  the  infant  of  such  purchase  after  he  becomes  of  age  will 
not  affect  such  liability.     (Foster  v.  Wilson,  75  Fed.  Rep.,  797.) 

Liability  is  for  Benefit  of  all  Creditors, — The  liability  of  the 
stockholders  can  be  enforced  only  in  favor  of  all  the  creditors.  If, 
therefore,  a  stockholder  gives  any  security  for  his  liability,  it  must 
be  for  the  benefit  of  all  the  creditors  alike.  Where  a  stockholder, 
after  the  failure  of  a  bank,  gave  a  mortgage  for  the  purpose  of  se- 
curing a  single  depositor,  such  mortgage  was  held  void  as  against 


57 

a  judgment  obtained  in  an  action  against  such  stockholder  to  en- 
force his  individual  liability.     (Catch  v.  Fitch,  34  Fed.  Rep.,  566.) 

Liability  of  one  National  Bank  as  Stockholder  in  Another. 
— A  National  bank  may  be  held  liable  as  a  stockholder  in  another 
National  bank  which  has  failed ;  for  though  the  acquisition  of  such 
stock  should  be  illegal  (which  it  is  not),  the  bank  could  not  set  up 
its  own  violation  of  law  to  escape  the  responsibility  resulting  from 
its  illegal  action.  (National  Bank  v.  Cove,  96  U.  S- ,  628  ;  First 
National  Bank  of  Concord  v.  Hawkins,  33  U-  S.  App.,  747.) 

Rescinding  Purchase — Fraud  of  Bank. — A  stockholder  who 
has  been  induced  b)^  fraudulent  representations  to  subscribe  for 
stock  in  a  National  bank  will  not  necessarily  be  precluded  from 
repudiating  such  subscription  by  reason  of  the  insolvency  of 
the  bank,  if  he  has  exercised  due  diligence  in  discovering  the 
fraud,  and  has  acted  promptly  after  such  discovery.  (Newton 
National  Bank  v.  Newbegin,  74  Fed.  Rep.,  135.)  An  intend- 
ing purchaser  of  bank  stock  is  entitled  to  rely  upon  a  state- 
ment of  its  president  as  to  the  bank's  condition,  without  inquiring 
further.  (Merrill  v.  Florida  Land  &  Improvement  Co.,  60  Fed. 
Rep.,  17.)  The  receipt  by  a  bank  of  the  proceeds  of  a  fraudulent 
sale  of  stock  belonging  to  it,  and  the  subsequent  appointment  of  a 
receiver,  gives  its  creditors  no  such  right  in  the  proceeds  as  will 
prevent  the  purchasers  from  rescinding  the  sale  and  requiring  res- 
titution.    (/^.) 

Estoppel. — A  shareholder  against  whom  suit  is  brought  to  re- 
cover the  assessment  made  upon  him  by  the  Comptroller  will  not 
be  permitted  to  deny  the  existence  of  the  association,  or  that  it 
was  legally  incorporated.  (Casey  v.  Galli,  94  U.  S-,  673;  Wheelock 
V.  Kost,  77  111.,  296.) 

Rules  Applicable. — While  the  liability  of  stockholders  in  Na- 
tional banks  is  to  be  rigorously  enforced,  the  courts  will  not  treat 
them  with  exceptional  severity,  and  apply  to  their  transfers  differ- 
ent rules  from  those  which  obtain  in  other  business  transactions. 
(Hayes  v.  Shoemaker,  39  Fed.  Rep.,  319-) 

Procedure. — The  creditors  of  an  insolvent  National  bank  must 
seek  their  remedy  through  the  Comptroller,  in  the  mode  prescribed 
by  the  statute  ;  they  can  not  proceed  directly  in  their  own  names 


58 

against  stocktiolders.  (Kennedy  v.  Gibson,  8  Wall,  498.)  It  is 
the  dut)'^  of  the  Comptroller  of  the  Currency  to  decide  when  pro- 
ceedings are  necessary  against  the  stockholders  of  a  National  bank 
to  enforce  their  personal  liability,  and  to  what  extent  such  liabil- 
ity shall  be  enforced  ;  and  in  an  action  by  a  receiver  to  enforce  such 
liability,  such  prior  determination  of  the  Comptroller  must  be  dis- 
tinctly averred  and  proved.  (Kennedy  v.  Gibson,  8  Wall,  498.) 
But  it  is  not  essential  to  aver  and  prove  that  the  assessment  was 
necessary,  for  the  decision  of  the  Comptroller  on  this  point  is  con- 
clusive. (Strong  V.  Southworth,  8  Ben.,  331;  Kennedy  v.  Gibson, 
8  Wall.,  498 ;  Casey  v.  Galli,  94  U.  S.,  673.)  Nor  is  it  necessary 
to  allege  that  the  Comptroller  had  determined  that  the  assessment 
was  necessary ;  it  is  sufficient  to  allege  that  he  made  the  assess- 
ment. (O'Connor  v.  Witherby,  11 1  Cal.,  523.)  When  the  full  per- 
sonal liability  of  shareholders  is  to  be  enforced  the  action  must  be 
at  law.  (Kennedy  v.  Gibson,  8  Wall.,  498;  Casey  v.  Galli,  94  U. 
S-,  673.)  And  it  may  be  at  law,  though  the  assessment  is  not  for 
the  full  value  of  the  shares ;  for,  since  the  sum  each  shareholder 
must  contribute  is  a  certain  exact  sum,  there  is  no  necessitj^  for 
invoking  the  aid  of  a  court  of  equity.  (Bailey  v.  Sawyer,  4  Dill., 
463  ;  I  N.  B.  C,  356.)  But  the  suit  may  be  in  equity.  (Kennedy 
V.  Gibson,  8  Wall.,  498.)  And  it  is  no  objection  to  the  bill  that 
other  stockholders,  not  within  the  jurisdiction  of  the  court,  are  not 
co-defendants.     {Id.^     [See  Amendment  in  Supplement.] 

When  Right  of  Action  Accrues — Statute  of  Limitations. 
— A  right  of  action  against  a  stockholder  does  not  accrue  until  the 
Comptroller  has  determined  that  it  is  necessary  to  enforce  the  indi- 
vidual liability  ;  but  where  there  is  great  and  unexplained  delay 
in  making  such  assessment  the  action  may  be  barred  by  the  statute 
of  limitations  though  the  action  is  brought  shortlj'-  after  the  mak- 
ing of  the  assessment.  (Price  v.  Yates,  19  Alb.  I^aw  Journal, 
295  ;  2  N.  B.  Cas.,  204.)  The  State  statutes  of  limitations  apply 
to  actions  to  enforce  assessments.  (Butler  v.  Poole,  44  Fed.  Rep., 
586 ;  Thompson  v.  German  Insurance  Company,  76  Fed.  Rep, 
892.)  The  statute  begins  to  run  as  soon  as  the  assessment  becomes 
due  and  payable.  (Thompson  v.  German  Insurance  Company, 
supra.^ 

Set-off. — A  stockholder  of  an  insolvent  National  bank,  who 
happens  also  to  be  one  of  its  creditors,  can  not  cancel  or  diminish 


59 

the  assessment  to  which  the  provisions  of  Sec.  515 1,  Rev.  St.,  make 
him  Hable  by  offsetting  his  individual  claim  against  it.  (Hobart, 
Receiver,  etc.,  v.  Gould,  8  Fed.  Rep.,  57.)  In  an  action  by  the 
receiver  of  an  insolvent  National  bank  to  recover  of  a  stockholder 
an  assessment  on  his  shares,  the  defendant  alleged  as  a  counter- 
claim that  the  Comptroller  of  the  Currency  had  directed  the  bank 
to  restore  the  value  of  certain  securities  held  by  it  which  had  been 
reported  as  worthless  by  an  examiner;  that  certain  of  the  stock- 
holders, including  defendant,  had  raised  a  fund  which  was  placed 
in  the  hands  of  trustees  to  apply  so  much  as  might  be  from  time 
to  time  required  by  the  Comptroller  to  retire  such  securities ;  that 
the  fund  was  deposited  with  the  bank  with  full  notice  of  the  pur- 
pose to  which  it  was  to  be  applied;  that  a  portion  had  been  used 
to  retire  the  securities  designated,  and  that  when  the  bank  failed 
the  balance  of  the  fund  came  into  the  hands  of  the  receiver,  and 
was  now  claimed  by  him  as  a  part  of  the  ordinary  assets  of  the 
bank ;  that  a  certain  portion  of  this  balance  belonged  to  defendant, 
which  amount  he  asked  to  set  off  against  the  plaintiff's  demand: 
Held,  That  a  general  demurrer  based  on  the  ground  that  no 
set-off  or  counterclaim  was  available  in  such  an  action  would  be 
overruled,  as  the  claim  could  be  set  off  if  it  was  of  such  a  nature 
that  the  holder  would  be  entitled  to  receive  the  full  amount  before 
distribution  by  the  receiver  to  general  creditors.  (Welles  v.  Stout, 
38  Fed.  Rep.,  807.)  In  another  case  the  defendant,  for  the  pur- 
pose of  helping  a  bank,  of  which  complainant  was  a  stockholder, 
in  a  financial  crisis,  loaned  it  certain  securities  belonging  to  com- 
plainant, and  when  complainant  was  informed  of  the  fact  she  did 
not  object.  She  was  assured  by  the  bank's  officers  that  if  the 
bank  was  saved  the  securities  would  be  returned,  and  if  it  failed 
the  avails  would  be  credited  on  her  assessment  as  a  stockholder. 
The  bank  failed,  and  the  securities  were  not  returned:  Held,  That 
she  was  not  entitled,  as  against  other  creditors,  to  set  off  the  value 
of  the  securities  against  her  assessment,  but  was,  as  to  such  value, 
on  the  same  footing  as  any  other  creditor.  (Sowles  v.  Witters  et 
al.,  39  Fed.  Rep.,  403.)  But  the  indebtedness  on  the  assessment 
of  a  stockholder  who  is  insolvent  may  be  set  off  against  a  dividend, 
payable  out  of  the  assets  of  the  bank,  on  a  balance  due  him  on 
his  deposit  account  with  the  bank,  at  the  time  of  its  failure. 
(King  V.  Armstrong,  50  Ohio  St.,  222.)  And  an  assignment  by 
the  stockholder  of  his  claim  against  the  bank,  before  the  direction 
of  the  Comptroller  to  enforce  his  liability,  but  after  the  insolvency 


6o 

of  the  bank,  does  not  affect  the  right  to  set  oflFhis  liability  against 
the  dividend  due  on  his  claim,  nor  does  the  fact  that  the  Comp- 
troller, at  the  time  of  the  assignment,  had  not  determined  the 
amount  necessary  to  be  collected  from  the  stockholders  for  the  pay- 
ment of  the  creditors.  It  is  sufficient  that  such  direction  has  been 
given,  and  amount  so  determined,  when  the  set-off  is  made.     (Z^-) 

Agent  May  Not  Enforce. — An  agent  chosen  by  stockholders 
to  take  charge  of  the  business  of  a  National  bank  in  liquidation 
can  not  enforce  the  individual  liability  of  the  stockholders,  after 
all  the  debts  have  been  paid,  (Church  v.  Ayer,  80  Fed.  Rep.,  543.) 

Claim  Not  Entitled  to  Preference. — The  individual  liability 
of  a  stockholder  in  an  insolvent  National  bank  is  not  a  preferred 
claim  against  his  estate,  and  is  not  entitled  to  priority  of  payment 
even  though  the  estate  is  insolvent.  (///  Re  Beard's  Kstate,  50 
Pac.  Rep.,  226.) 

34.    Executors,  Trustees,  etc.,  Not  Personally  Liable. 

Section  5152. — Persons  holding  stock  as  executors,  administrators,  guar- 
dians, or  trustees,  shall  not  be  personally  subject  to  any  liabilities  as  stock- 
holders ;  but  the  estates  and  funds  in  their  hands  shall  be  liable  in  like  man- 
ner and  to  the  same  extent  as  the  testator,  intestate,  ward,  or  person  inter- 
ested in  such  trust-funds  would  be,  if  living  and  competent  to  act  and  hold 
the  stock  in  his  own  name. 

Application  of  Section. — This  section  is  of  general  application 
and  is  not  limited  to  trustees  appointed  such  by  will  or  by  order  of 
some  court  or  judge.  (lyucas  v.  Coe,  86  Fed.  Rep.,  972.)  In  the 
case  cited  C  subscribed  for  stock  in  a  National  bank  as  trustee  for 
H,  an  infant,  and  a  certificate  was  issued  to  "  C  as  trustee  for  H  ; " 
afterwards,  the  capital  stock  being  reduced,  this  certificate  was 
surrendered  and  another  issued  in  lieu  thereof  to  C  merely  ' '  as 
trustee,"  without  naming  the  beneficiary.  The  officers  of  the 
bank  were  advised  that  C  held  the  stock  as  trustee  precisely  as  in 
the  surrendered  certificate.  Held,  that  C  was  not  liable  for  an 
assessment  upon  the  stock.     (Z^/-) 

An  executor  continues  to  be  liable  as  such  for  an  assessment 
upon  National  bank  stock  left  by  his  testator  until  he  has  trans- 
ferred the  personal  property  belonging  to  the  estate.  (Baker  v. 
Beach,  85  Fed.  Rep,,  836.) 


6i 

Evidence  of  Stock  Ownership. — The  fact  that  the  stock  is 
held  in  a  representative  capacity  must  be  noted  on  the  stock-book 
of  the  bank ;  if  a  person  appears  there  as  absolute  owner  of  the 
stock  he  will  not  be  permitted  tb  deny  that  he  is  such.  (Davis  v. 
Essex  Baptist  Society,  U.  S.  D.  C,  44  Conn.,  569 ;  Lewis  v.  Switz, 
74  Fed.  Rep.,  1.)  In  the  case  first  cited  the  defendants  sought  to 
show,  by  extrinsic  evidence,  that  they  held  the  stock  as  trustees, 
although  the  certificates  and  the  stock-ledger  did  not  disclose  such 
fact.  This  it  was  held  they  could  not  do.  The  court  said : 
"  Creditors  have  a  right  to  know  who  have  pledged  their  individual 
liability.  If  the  trusteeship  does  not  appear  upon  the  books  of  the 
bank,  they  have  a  right  to  infer  that  the  stockholder  is  personally 
liable.  If  a  trustee  wislies  to  disclose  his  trusteeship  there  is  no 
difiiculty  in  giving  notice  upon  the  books  of  the  bank.  If  he 
doeg  not  disclose  his  trusteeship  he  is  guilty  of  laches,  for  which 
others  should  not  suffer.  The  settlement  of  the  afi'airs  of  an  in- 
solvent bank  would  be  rendered  a  matter  of  great  labor,  expense, 
and  delay  if  persons  who  appeared  upon  the  books  of  the  bank 
as  individual  stockholders  were  permitted  to  relieve  themselves  by 
proving  that  they  held  the  stock  as  executors,  or  guardians,  or 
trustees.  If  A  is  permitted  to  prove  that  he  holds  his  stock  as 
trustee  for  B,  and  B  is  permitted  to  show  that  he  is  trustee  for  A, 
litigation  would  be  protracted,  individual  stockholders  would 
sufier,  and  the  strength  of  the  personal  liability  section  would  be 
seriously  impaired." 

This  reasoning  appears  to  be  very  sound  and  forcible,  but  the 
decision  is  in  conflict  with  that  in  McMahon  v.  Macy  (51  N.  Y., 
155),  which  arose  under  an  analogous  provision  in  New  York 
Railroad  Act.  One  to  whom  the  shares  are  assigned  in  trust  as 
security  for  a  debt  due  a  third  person,  and  following  whose  name 
on  the  stock-book  of  the  bank  is  the  word  "  trustee,"  is  not  liable 
for  the  assessment  under  Section  5151,  and  is  also  within  the  pro- 
vision of  Section  5152,  exempting  from  such  liability  persons 
holding  stock  as  trustees.  (Welles  v.  Larrabee,  36  Fed.  Rep.,  866.) 

35.    Depositaries  of  Public  Moneys. 

Section  5153. — All  National  banking  associations,  designated  for  that  pur- 
pose by  the  Secretary  of  the  Treasury,  shall  be  depositaries  of  public  money, 
except  receipts  from  customs,  under  such  regulations  as  may  be  prescribed 
by  the  Secretary ;  and  they  may  also  be  employed  as  financial  agents  of  the 
Government ;  and  they  shall  perform  all  such  reasonable  duties,  as  depositaries 


62 

of  public  moneys  and  financial  agents  of  the  Government,  as  may  be  required 
of  them.  The  Secretary  of  the  Treasury  shall  require  the  associations  thus 
designated  to  give  satisfactory  security,  by  the  deposit  of  United  States  bonds 
and  otherwise,  for  the  safe-keeping  and  prompt  payment  of  the  public  money 
deposited  with  them,  and  for  the  faithful  performance  of  their  duties  as  finan- 
cial agents  of  the  Government.  And  every  association  so  designated  as  re- 
ceiver or  depositary  of  the  public  money  shall  take  and  receive  at  par  all  ot 
the  National  currency  bills,  by  whatever  association  issued,  which  have  been 
paid  into  the  Government  for  internal  revenue  or  for  loans  or  stocks. 

See  Sections  Rev.  Stat.  3620,  3847,  4046,  5488,  5497. 

All  arrangements  to  become  public  depositaries  must  be  made 
with  the  Secretary  of  the  Treasury.  The  security  required  is 
within  the  discretion  of  the  Secretary.  The  requirement  at  present 
is  United  States  bonds,  or  bonds  guaranteed  by  the  United  States. 
A  deposit  is  allowed  to  the  extent  of  the  full  value  of  the  bonds, 
or  more,  according  to  their  value,  but  is  always  kept  below  the 
value  of  the  security.  The  Secretary  of  the  Treasury  could  legally 
accept  other  security  than  United  States  bonds  if  he  saw  fit. 

A  National  bank,  though  not  designated  as  a  United  States 
depositary,  which  receives  a  deposit  of  United  States  moneys  from 
a  postmaster,  thereby  assumes  a  fiduciary  relation  to  the  Govern- 
ment, and  is  liable  to  the  United  States  as  a  bailee  of  such  funds. 
(United  States  v.  National  Bank  of  Asheville,  73  Fed.  Rep.,  379.) 

For  regulations  in  regard  to  Government  Depositaries,  see 
page  236. 

36.    Conversion  of  State  into  National  Banks. 

Section  5154. — Any  bank  incorporated  by  special  law,  or  any  banking 
institution  organized  under  a  general  law  of  any  State,  may  become  a  Na- 
tional association  under  this  Title  by  the  name  prescribed  in  its  organization 
certificate ;  and  in  such  case  the  articles  of  association  and  the  organization 
certificate  may  be  executed  by  a  majority  of  the  directors  of  the  bank  or 
banking  institution  ;  and  the  certificate  shall  declare  that  the  owners  of  two- 
thirds  of  the  capital  stock  have  authorized  the  directors  to  make  such  a  certi- 
ficate, and  to  change  and  convert  the  bank  or  banking  institution  into  a  Na- 
tional association.  A  majority  of  the  directors,  after  executing  the  articles  of 
association  and  organization  certificate,  shall  have  power  to  execute  all  other 
papers,  and  to  do  whatever  may  be  required  to  make  its  organization  perfect 
and  complete  as  a  National  association.  The  shares  of  any  such  bank  may 
continue  to  be  for  the  same  amount  each  as  they  were  before  the  conversion, 
and  the  directors  may  continue  to  be  the  directors  of  the  association  until 
others  are  elected  or  appointed  in  accordance  with  the  provisions  of  this 
chapter ;  and  any  State  bank  which  is  a  stockholder  in  any  other  bank,  by 


63 

authority  of  State  laws,  may  continue  to  hold  its  stock,  although  either  bank, 
or  both,  may  be  organized  under  and  have  accepted  the  provisions  of  this 
Title.  When  the  Comptroller  of  the  Currency  has  given  to  such  association 
a  certificate,  under  his  hand  and  official  seal,  that  the  provisions  of  the  Title 
have  been  complied  with,  and  that  it  is  authorized  to  commence  the  business 
of  banking,  the  association  shall  have  the  same  powers  and  privileges,  and 
shall  be  subject  to  the  same  duties,  responsibilities,  and  rules,  in  all  respects 
as  are  prescribed  for  other  associations,  originally  organized  as  National 
banking  associations,  and  shall  be  held  and  regarded  as  such  an  association. 
But  no  such  association  shall  have  a  less  capital  than  the  amount  prescribed 
for  associations  organized  under  this  Title. 

Authority  Required. — This  section  was  enacted  in  order  to  in- 
duce State  banks  to  enter  the  National  system.  The  authority  of 
two-thirds  of  the  stock  is  required  to  empower  the  directors  to  act. 
It  has  been  said  by  the  Supreme  Court  of  the  United  States  that 
no  authority  from  a  State  is  necessary  to  convert  a  State  bank  into 
a  National  bank  (Casey  v.  Galli,  94  U.  S.,  673),  but  many  States 
have  passed  enabling  acts,  both  to  enable  State  banks  to  become 
National  banks  and  to  enable  National  banks  to  become  State 
banks.  State  banks  intending  to  convert  into  National  banks 
should  be  guided  by  the  State  statute  as  to  the  closing  of  the  affairs 
under  the  State  charter.  From  the  special  privilege  granted  to 
converted  State  banks  to  continue  to  hold  the  stock  in  other  banks 
they  held  when  State  banks,  it  may  perhaps  be  inferred  that  the 
power  of  holding  stock  in  other  banks  was  not  intended  to  be 
granted  to  all  National  associations. 

Corporate  Relation  to  Old  Bank. — The  conversion  of  a  State 
bank  into  a  National  bank  does  not  destroy  its  identity  or  its  cor- 
porate existence;  it  is  not  a  closing  of  business,  but  simply  a  con- 
tinuation of  the  same  body,  with  the  same  officers  and  stock- 
holders, the  same  property,  assets  and  business  of  banking  under 
a  changed  jurisdiction.     (Metropolitan  National  Bank  z'.  Clagett, 
141  U.  S.,  520)  The  conversion  and  change  of  name  do  not  affect 
its  right  to  sue  on  liabilities  incurred  to  it  under  its  former  name. 
(Michigan   Insurance   Bank  v.   Eldred,    143  U.   S-,  293.)     Thus, 
where  a  State  bank  at  the  time  of  its  change  to  a  National  bank,  ^ 
held  a  continuing  guaranty  of  loans  made  by  it  to  one  W-,  upon 
the  strength  of  which  it  had  made  loans  and  after  the  change  fur- 
ther advances  were  made,  it  was  held  that  an  action  was  maintain- 
able by  the  National  bank  upon  the  guaranty,  and  that  the  guar- 
antor was  liable  for  the  loans  made  both  before  and  after  the 


64 

change.  (City  National  Bank  v.  Phelps,  97  N.  Y.,  44.)  And 
conversely  the  National  bank  is  liable  after  the  conversion  for  all 
the  obligations  of  the  old  institution.  (Coffee  v.  National  Bank  of 
Missouri,  46  Mo.,  140;  Kelsey  v.  National  Bank  of  Crawford,  69 
Pa.  St.,  426.)  For  example,  it  will  be  liable  to  holders  of  its  out- 
standing circulating  notes,  issued  in  accordance  with  State  laws. 
(Metropolitan  National  Bank  v.  Clagett,  141  U.  S.,  520.)  In  the 
case  last  cited  it  was  held  that  the  provisions  of  the  statute  of  New 
York  (Laws  1859,  c.  236)  as  to  the  redemption  of  circulating  notes 
issued  by  the  banks  of  such  State,  and  the  release  of  the  bank  if 
the  notes  should  not  be  presented  within  six  years,  do  not  apply 
to  a  bank  converted  into  a  National  bank.  And  it  has  been  held 
that  a  State  statute  which  continues  the  bank  as  a  body  corporate 
for  certain  purposes,  for  a  term  after  the  conversion,  does  not  re- 
lieve the  National  bank  from  liability  for  the  debts  of  the  bank  as 
a  State  institution.  (Atlantic  National  Bank  v.  Harris,  118  Mass., 
147.)  A  National  bank,  organized  as  the  successor  of  a  State 
bank,  may  take  and  hold  the  assets  of  the  bank  whose  place  it 
takes,  though  there  was  not  in  form  a  conversion  from  a  State  to 
a  National  corporation,  but  the  organization  of  a  new  corporation. 
(Bank  v.  Mclntyre,  40  Ohio  St.,  528.)  And  such  bank  will  be 
liable  to  the  depositors  of  the  former  bank.  (Kans  v.  Exchange 
Bank,  79  Mo.,  182.) 

Assets  of  Converting  Bank. — The  Comptroller  of  the  Cur- 
rency has  ruled  that  a  bank  entering  the  National  system  by  con- 
version will  be  allowed  to  carry  over  to  and  include  in  its  assets  as 
a  National  bank  only  such  assets  as  are  allowed  by  the  National 
Bank  Act,  excluding  any  assets  prohibited  by  Sections  5137  and 
5200. 

Charter  of  State  Bank. — When  a  State  bank  has  been  converted 
into  a  National  bank,  it  thereby  surrenders  its  charter  as  a  State 
bank,  and  when  the  period  during  which  it  may  do  business  as  a 
National  bank  has  expired,  its  corporate  existence,  both  as  a  State 
bank  and  also  as  a  National  bank,  is  at  an  end.  (Hayden  v.  Bank 
of  Syracuse,  59  Hun.,  620.) 

Directors,  Name,  etc. — All  of  the  directors  of  the  State  bank 
at  the  time  of  conversion  will  continue  to  be  directors  of  the 
National  bank  until  others  are  appointed  or  elected,  though  some 
of  them  may  not  have  joined  in  the  execution  of  the  articles  of 


65 

association  and  organization  certificate.  (IvOckwood  v.  The  Amer- 
ican National  Bank,  9  R.  I. ,  308. )  A  State  law  authorizing  National 
banks  which  have  been  converted  from  State  banks  to  use  the 
name  of  the  original  corporation  for  the  purpose  of  prosecuting 
and  defending  suits  is  not  in  conflict  with  the  National  banking 
law,  and  therefore  proceedings  based  upon  a  judgment  obtained 
before  the  conversion  may  be  instituted  by  such  association  in  its 
former  corporate  name.  (Thomas  v.  Farmers'  Bank  of  Maryland, 
46  Md.,  43.)  Where  a  bank  has  been  converted,  new  certificates 
of  stock  are  not  necessary.  (Keyser  v.  Hitz,  133  U.  S.,  138.) 
Savings  banks  organized  in  the  District  of  Columbia  under  an  act 
of  Congress  and  having  a  capital  stock  paid  up  in  whole  or  in  part, 
may  be  converted  into  National  banks.  (Keyser  z/.  Hitz,  133  U.  S., 
138.)     For  forms  and  instructions,  see  page  211. 

37.    State  Banks  Having  Branches. 

Section  5155. — It  shall  be  lawful  for  any  bank  or  banking  association, 
organized  under  State  laws,  and  having  branches,  the  capital  being  joint  and 
assigned  to  and  used  by  the  mother-bank  and  branches  in  definite  propor- 
tions, to  become  a  National  banking  association  in  conformity  with  existing 
laws,  and  to  retain  and  keep  in  operation  its  branches,  or  such  one  or  more 
of  them  as  it  may  elect  to  retain  ;  the  amount  of  the  circulation  redeemable 
at  the  mother-bank,  and  each  branch,  to  be  regulated  by  the  amount  of  capi- 
tal assigned  to  and  used  by  each. 

The  authority'  expressly  conferred  by  this  section  appears  to 
exclude  by  implication  the  right  to  establish  branches  in  any  other 
case  ;  and  this  has  been  the  view  uniformly  held  by  the  Comp- 
trollers of  the  Currency. 

38.    Rights  of  Associations  Organized  under  Act  of  1863. 

Section  5156. — Nothing  in  this  Title  shall  affect  any  appointments  made, 
acts  done,  or  proceedings  had  or  commenced  prior  to  the  third  day  of  June, 
eighteen  hundred  and  sixty-four,  in  or  toward  the  organization  of  any  National 
banking  association  under  the  act  of  February  twenty-five,  eighteen  hundred 
and  sixty-three;  but  all  associations  which,  on  the  third  day  of  June,  eighteen 
hundred  and  sixty-four,  were  organized  or  commenced  to  be  organized  under 
that  act,  shall  enjoy  all  the  rights  and  privileges  granted,  and  be  subject  to 
all  the  duties,  liabilities,  and  restrictions  imposed  by  this  Title,  notwithstand- 
ing all  the  steps  prescribed  by  this  Title  for  the  organization  of  associations 
were  not  pursued,  if  such  associations  were  duly  organized  under  that  act. 

The  banks  organized  under  the  original  National  Banking  Act  of 
February  25,  1863,  have  all  these  vested  rights  under  the  earlier 
act  secured  to  them  by  this  section. 
5 


CHAPTER   III 


OBTAINING  AND  ISSUING  CIRCULATING  NOTES. 


39.  Applies  to  all  National  Banks. 

Section  5157. — The  provisions  of  Chapters  two,  three,  and  four*  of  this 
Title,  which  are  expressed  without  restrictive  words,  as  applying  to  "National 
banking  associations,"  or  to  "  associations,"  apply  to  all  associations  organized 
to  carry  on  the  business  of  banking  under  any  Act  of  Congress. 

This  section  gives  the  same  rights  to  all  National  banking  asso- 
ciations at  whatever  date  organized. 

40.  United  States  Bonds  Defined. 

Section  5158. — The  term  "United  States  bond,"  as  used  throughout  this 
chapter,  shall  be  construed  to  mean  registered  bonds  of  the  United  States. 

41.    United  States  Bonds  to  be  Deposited. 

Section  5159. — Every  association,  after  having  complied  with  the  pro- 
visions of  this  Title,  preliminary  to  the  commencement  of  the  banking  busi- 
ness, and  before  it  shall  be  authorized  to  commence  banking  business  under  this 
Title,  shall  transfer  and  deliver  to  the  Treasurer  of  the  United  States  any 
United  States  registered  bonds,  bearing  interest,  to  an  amount  not  less  than 
thirty  thousand  dollars  and  not  less  than  one-third  of  the  capital  stock  paid 
in.  Such  bonds  shall  be  received  by  the  Treasurer  upon  deposit,  and  shall 
be  by  him  safely  kept  in  his  office,  until  they  shall  be  otherwise  disposed  of, 
in  pursuance  of  the  provisions  of  this  Title. 

Under  the  Act  of  June  20th,  1874,  Section  4,  par.  159,  the  maxi- 
mum amount  which  any  National  bank  is  required  to  deposit, 
whatever  its  capital,  is  $50,000.  By  the  Act  of  July  12th,  1882, 
Section  8,  par.  188,  any  bank  having  a  capital  of  $150,000  or  less 
may  be  organized  on  a  deposit  of  bonds  equal  to  one  quarter  of  such 
capital.  Therefore  banks  with  a  capital  over  $150,000  must  deposit 
$50,000  in  bonds ;  those  with  $150,000  or  less,  one  quarter  of  such 
capital. 


*  Chapters  III,  IV.  and  V  of  this  work. 
66 


67 

42.    Increase  and  Decrease  of  Capital  and  Bonds. 

Section  5160. — The  deposits  of  bonds  made  by  each  association  shall  be 
increased  as  its  capital  may  be  paid  up  or  increased,  so  that  every  association 
shall  at  all  times  have  on  deposit  with  the  Treasurer  registered  United  States 
bonds  to  the  amount  of  at  least  one-third  of  its  capital  stock  actually  paid  in. 
And  any  association  that  may  desire  to  reduce  its  capital  or  close  up  its 
business  and  dissolve  its  organization,  may  take  up  its  bonds  upon  returning 
to  the  Comptroller  its  circulating  notes  in  the  proportion  hereinafter  required, 
or  may  take  up  any  excess  of  bonds  beyond  one-third  of  its  capital  stock,  and 
upon  which  no  circulating  notes  have  been  delivered. 

As  stated  under  the  preceding  section,  later  laws  have  changed 
the  limit  of  bonds,  and  the  limits  prescribed  in  these  later  laws 
must  be  observed  in  increasing  or  reducing  capital  stock.  Banks 
may  still,  however,  return  circulation  under  this  section,  and  take 
up  excess  of  bonds  above  legal  limit  on  which  no  circulating  notes 
have  been  delivered. 

43.    Exchange  of  Coupon  Bonds. 

Section  5 161. — To  facilitate  a  compliance  with  the  two  preceding  sections, 
the  Secretary  of  the  Treasury  is  authorized  to  receive  from  any  association, 
and  cancel,  any  United  States  coupon  bonds,  and  to  issue  in  lieu  thereof 
registered  bonds  of  like  amount,  bearing  a  like  rate  of  interest  and  having 
the  same  time  to  run. 

Coupon  bonds,  as  well  as  registered  bonds  properly  transferred, 
are  usually  sent  to  the  office  of  the  Comptroller  of  the  Currency 
by  registered  mail  or  express,  and  the  bond  clerk  in  that  office 
takes  the  necessary  steps  to  convert  the  coupon  bonds  into  regis- 
tered, and  to  turn  over  the  bonds  in  due  course  to  the  custody  of 
the  Treasurer  of  the  United  States. 

44.    Transfer  of  Bonds  to  and  by  Treasurer. 

Section  5162. — All  transfers  of  United  States  bonds  made  by  any  associa- 
tion under  the  provisions  of  this  Title  shall  be  made  to  the  Treasurer  of  the 
United  States  in  trust  for  the  association,  with  a  memorandum  written  or 
printed  on  each  bond,  and  signed  by  the  cashier  or  some  other  officer  of  the 
association  making  the  deposit.  A  receipt  shall  be  given  to  the  association 
by  the  Comptroller  of  the  Currency,  or  by  a  clerk  appointed  by  him  for  that 
purpose,  stating  that  the  bond  is  held  in  trust  for  the  association  on  whose 
behalf  the  transfer  is  made,  and  as  security  for  the  redemption  and  payment 
of  any  circulating  notes  that  have  been  or  may  be  delivered  to  such  associa- 
tion. No  assignment  or  transfer  of  any  such  bond  by  the  Treasurer  shall  be 
deemed  valid  unless  countersigned  by  the  Comptroller  of  the  Currency. 


68 

Deposit  of  Bonds. — The  bonds  when  sent  to  the  Comptroller 
should  bear  the  memorandum,  written  or  printed,  and  signed  by 
the  cashier,  that  they  are  transferred  to  the  Treasurer  in  trust  for 
the  association.  A  receipt  is  given  by  the  Comptroller  of  the  Cur- 
rency, and  when  the  bonds  are  placed  in  the  custody  of  the  Treas- 
urer, a  receipt  is  given  in  duplicate  by  that  officer—  one  is  sent  to 
the  bank  and  the  other  to  the  Comptroller  of  the  Currenc}'. 

Withdrawal  of  Bonds. — The  Comptroller  and  Treasurer  will 
not  permit  the  withdrawal  and  transfer  of  bonds  from  the  Treas- 
urer except  upon  authority  given  by  the  board  of  directors  to 
transfer  the  same  to  the  designated  transferee.  (See  form  of 
resolution,  page  274.)  When  bonds  are  so  to  be  withdrawn,  the 
Treasurer's  duplicate  receipt  held  by  the  bank  must  be  sent  to  the 
Comptroller  with  the  directors'  resolution.  Care  should  be  taken 
to  file  this  receipt  where  it  can  re?dily  be  found.  When  it  cannot 
be  found  the  Treasurer  requires  an  affidavit  to  that  effect,  before 
issuing  another  duplicate. 

45.    Registry  of  Bond  Transfers. 

Section  5163. — The  Comptroller  of  the  Currency  shall  keep  in  his  office 
a  book,  in  which  he  shall  cause  to  be  entered,  immediately  upon  counter- 
signing it,  every  transfer  or  assignment  by  the  treasurer  of  any  bonds  belong- 
ing to  a  National  banking  association  presented  for  his  signature.  He  shall 
state  in  such  entry  the  name  of  the  association  from  whose  account  the  trans- 
fer is  made,  the  name  of  the  party  to  whom  it  is  made,  and  the  par  value  of 
the  bonds  transferred. 

Bonds  received  in  the  Comptroller's  office  are  first  receipted  for 
to  the  express  company  or  post  office,  and  are  then  entered  in  the 
books  of  the  office.  The  subsequent  history  of  each  bond  can  thus 
be  accurately  traced. 

46.    Association  to  be  Advised  of  Transfers. 

Section  5164. — The  Comptroller  of  the  Currency  shall,  immediately  upon 
countersigning  and  entering  any  transfer  or  assignment  by  the  Treasurer  of 
any  bonds  belonging  to  a  National  banking  association,  advise  by  mail  the 
association  from  whose  accounts  the  transfer  is  made  of  the  kind  and  numeri- 
cal designation  of  the  bonds  and  the  amount  thereof  so  transferred. 

Advice  to  the  bank  is  required  as  an  additional  precaution 
against  erroneous  or  fraudulent  transfers  from  its  account  in  trust 


69 

47.    Comptroller  and  Treasurer  to  have  Access  to  Books. 

Section  5165. — The  Comptroller  of  the  Currency  shall  have  at  all  times, 
during  office  hours,  access  to  the  books  of  the  Treasurer  of  the  United  States 
for  the  purpose  of  ascertaining  the  correctness  of  any  transfer  or  assignment 
of  the  bonds  deposited  by  an  association,  presented  to  the  Comptroller  to 
countersign ;  and  the  Treasurer  shall  have  the  like  access  to  the  book  men- 
tioned in  section  fifty-one  hundred  and  sixty-three,  during  office  hours,  to 
ascertain  the  correctness  of  the  entries  in  the  same;  and  the  Comptroller 
shall  also  at  all  times  have  access  to  the  bonds  on  deposit  with  the  Treasurer 
to  ascertain  their  amount  and  condition. 

This  section  prescribes  further  checks  on  mistakes  or  frauds. 

48.    Annual  Examination  of  Bonds. 

Section  5166. — Every  association  having  bonds  deposited  in  the  office  of 
the  Treasury  of  the  United  States  shall,  once  or  oftener  in  each  fiscal  year, 
examine  and  compare  the  bonds  pledged  by  the  association  with  the  books 
of  the  Comptroller  of  the  Currency  and  with  the  accounts  of  the  association, 
and,  if  they  are  found  correct,  to  execute  to  the  Treasurer  a  certificate  setting 
forth  the  different  kinds  and  the  amounts  thereof,  and  that  the  same  are  in 
the  possession  and  custody  of  the  Treasurer  at  the  date  of  the  certificate. 
Such  examination  shall  be  made  at  such  a  time  or  times  during  the  ordinary 
business  hours  as  the  Treasurer  and  the  Comptroller,  respectively,  may 
select,  and  may  be  made  by  an  officer  or  agent  of  such  association  duly  ap- 
pointed in  writing  for  that  purpose;  and  his  certificate  before  mentioned 
shall  be  of  hke  force  and  validity  as  if  executed  by  the  president  or  cashier. 
A  duplicate  of  such  certificate,  signed  by  the  Treasurer,  shall  be  retained  by 
the  association. 

This  section  throws  upon  the  association  the  direct  responsibility 
of  ascertaining  the  safety  and  actual  presence  on  deposit  of  the 
bonds  held  in  trust  for  it  by  the  Treasurer.  The  examination  is 
usually  made  by  the  bank's  accredited  agent. 

49.    Bonds  Held  as  Security  for  Circulation,  &c. 

Section  5167. — The  bonds  transferred  to  and  deposited  with  the  Treasurer 
of  the  United  States  by  any  association,  for  the  security  of  its  circulating 
notes,  shall  be  held  exclusively  for  that  purpose  until  such  notes  are 
redeemed,  except  as  provided  in  this  Title.  The  Comptroller  of  the  Cur- 
rency shall  give  to  any  such  association  powers  of  attorney  to  receive  and 
appropriate  to  its  own  use  the  interest  on  the  bonds  which  it  has  so  trans- 
ferred to  the  Treasurer ;  but  such  power  shall  become  inoperative  whenever 
such  association  fails  to  redeem  its  circulating  notes.  Whenever  the  market 
or  cash  value  of  any  bonds  thus  deposited  with  the  Treasurer  is  reduced 
below  the  amount  of  the  circulation  issued  for  the  same,  the  Comptroller 


70 

may  demand  and  receive  the  amount  of  such  depreciation  in  other  Unitea 
States  bonds  at  cash  value,  or  in  money,  from  the  association,  to  be  deposited 
with  the  Treasurer  as  long  as  such  depreciation  continues.  And  the  Comp- 
troller, upon  the  terms  prescribed  by  the  Secretary  of  the  Treasury,  may  per- 
mit an  exchange  to  be  made  of  any  of  the  bonds  deposited  with  the  Treasurer 
by  any  associations  for  other  bonds  of  the  United  States  authorized  to  be 
received  as  security  for  circulating  notes,  if  he  is  of  opinion  that  such  an  ex- 
change can  be  made  without  prejudice  to  the  United  States ;  and  he  may 
direct  the  return  of  any  bonds  to  the  association  which  transferred  the  same, 
in  sums  of  not  less  than  one  thousand  dollars,  upon  the  surrender  to  him  and 
the  cancellation  of  a  proportionate  amount  of  such  circulating  notes  :  Provided, 
That  the  remaining  bonds  which  shall  have  been  transferred  by  the  associa- 
tion offering  to  surrender  circulating  notes  are  equal  to  the  amount  required 
for  the  circulating  notes  not  surrendered  by  such  association,*  and  that  the 
amount  of  bonds  in  the  hands  of  the  Treasurer  is  not  diminished  below  the 
amount  required  to  be  kept  on  deposit  with  him,  and  that  there  has  been  no 
failure  by  the  association  to  redeem  its  circulating  notes,  nor  any  other  vio- 
lation by  it  of  the  provisions  of  this  Title,  f  and  that  the  market  or  cash  value 
of  the  remaining  bonds  is  not  below  the  amount  required  for  the  circulation 
issued  for  the  same. 

Interest  on  Bonds. — For  the  mode  of  obtaining  the  interest  on 
these  bonds  see  page  291.  ,  This  interest  may  be  retained  in  certain 
cases  ;  ist,  as  mentioned  in  this  section,  for  failure  to  redeem  circu- 
lating notes ;  2d,  for  failure  to  make  reports,  (see  Section  5213,  par. 
89,  and  Section  5215,  par.  91  ;)  3d,  for  failure  to  pay  taxes,  (see 
Section  5216,  par.  93.) 

United  States  Bonds  on  Deposit. — If  worth  less  in  the  market 
than  the  circulation  secured  by  the  same,  the  bank  can  be  required  to 
make  the  security  equal  to  the  face  value  of  its  notes  in  circulation 
Exchanges  of  bonds  must  be  made  by  going  through,  or  trans- 
ferring the  new  bonds  to  the  Treasurer  in  trust  and  having  the 
old  bonds  transferred  to  the  bank,  but  such  exchange  is  a  matter 
of  permission,  and  cannot  be  demanded.     All  the  conditions  men- 
tioned in  the  section  must  be  observed. 

50.  DeJivery  of  Circulation  to  Associations. 

Section  5 171. — Upon  a  deposit  of  bonds  as  prescribed  by  sections  fifty-one 
hundred  and  fifty-nine  and  fifty-one  hundred  and  sixty,  the  association  mak- 
ing the  same  shall  be  entitled  to  receive  from  the  Comptroller  of  the  Currency 

*See  Act  of  June  20th,  1874,  Section  4,  par  159. 
^Sections  5168,  5169,  and  5170.     Par.  21,  22,  23. 


71 

circulating  notes  of  different  denominations,  in  blank,  registered  and  counter- 
signed as  hereinafter  provided,  equal  in  amount  to  ninety  per  centum  of  the 
current  market  value  of  the  United  States  bonds  so  transferred  and  delivered, 
but  not  exceeding  ninety  per  centum  of  the  amount  of  the  bonds  at  the  par 
value  thereof,  if  bearing  interest  at  a  rate  not  less  than  five  per  centum  per 
annum  :  Provided,  That  the  amount  of  circulating  notes  to  be  furnished  to 
each  association  shall  be  in  proportion  to  its  paid-up  capital,  as  follows,  and 
no  more : 

First.  To  each  association  whose  capital  does  not  exceed  five  hundred 
thousand  dollars,  ninety  per  centum  of  such  capital. 

Second.  To  each  association  whose  capital  exceeds  five  hundred  thousand 
dollars,  but  does  not  exceed  one  milUon  of  dollars,  eighty  per  centum  of  such 
capital. 

Third.  To  each  association  whose  capital  exceeds  one  million  of  dollars, 
but  does  not  exceed  three  million[s]  of  dollars,  seventy-five  per  centum  of 
such  capital. 

Fotirth.  To  each  association  whose  capital  exceeds  three  millions  of  dol- 
lars, sixty  per  centum  of  such  capital. 

This  section  is  obsolete,  excepting  as  providing  for  circulation 
on  deposit  of  bonds,  having  been  amended  by  Act  of  March  14th, 
1900,  Section  12.  (See  Act.  page  311.)  This  act  provides  that 
any  association  may  receive  circulation  to  an  amount  equal  to 
the  face  value  of  the  United  States  bonds  deposited  to  secure 
the  same,  and  also  that  any  association  may  have  a  total  cir- 
culation to  an  amount  equal  to  its  capital  stock  paid  in,  provided 
the  market  price  of  said  bonds  is  not  below  par,  and  further  pro- 
vided that  not  more  than  one-third  of  its  circulation  shall  be  in 
five-dollar  notes. 

51.    Printing  of  Circulating  Notes,  Denominations,  &c. 

Section  5172. — In  order  to  furnish  suitable  notes  for  circulation,  the 
Comptroller  of  the  Currency  shall,  under  the  direction  of  the  Secretary  of  the 
Treasury,  cause  plates  and  dies  to  be  engraved,  in  the  best  manner  to  guard 
against  counterfeiting  and  fraudulent  alterations,  and  shall  have  printed 
therefrom,  and  numbered,  such  quantity  of  circulating  notes,  in  blank,  of  the 
denominations  of  one  dollar,  two  dollars,  three  dollars,  five  dollars,  ten  dol- 
lars, twenty  dollars,  fifty  dollars,  one  hundred  dollars,  five  hundred  dollars, 
one  thousand  dollars,  as  may  be  required  to  supply  the  associations  entitled 
to  receive  the  same.  Such  notes  shall  express  upon  their  face  that  they  are 
secured  by  United  States  bonds,  deposited  with  the  Treasurer  of  the  United 
States,  by  the  written  or  engraved  signatures  of  the  Treasurer  and  Register, 


72 

and  by  the  imprint  of  the  seal  of  the  Treasury  ;  and  shall  also  express  uf>on 
their  face  the  promise  of  the  association  receiving  the  same  to  pay  on  demand, 
attested  by  the  signatures  of  the  president  or  vice-president  and  cashier  ;  and 
shall  bear  such  devices  and  such  other  statements,  and  shall  be  in  such  form, 
as  the  Secretary  of  the  Treasury  shall,  by  regulation,  direct. 

52.  Plates  and  Dies,  and  Expenses  of  Bureau. 

Section  5173. — The  plates  and  special  dies  to  be  procured  by  the  Comp- 
troller of  the  Currency  for  the  printing  of  such  circulating  notes  shall  remain 
under  his  control  and  direction,  and  the  expenses  necessarily  incurred  in 
executing  the  laws  respecting  the  procuring  of  such  notes,  and  all  other 
expenses  of  the  Bureau  of  the  Currency,  shall  be  paid  out  of  the  proceeds  of 
the  taxes  or  duties  assessed  and  collected  on  the  circulatioti  of  National 
banking  associations  under  this  Title. 

Banks'  Double  Tax. — It  was  the  intention  of  the  original 
Banking  Act  that  all  expense  of  preparing  plates  for  printing  and 
for  the  printing  of  National  bank  notes  should  be  paid  from  the 
proceeds  of  taxes  or  duties  assessed  on  circulation.  The  tax  on 
circulation  still  continues  to  be  demanded,  but  under  the  provi- 
sions of  Section  3  of  the  Act  of  June  20th,  1874,  banks  are  now 
required  to  pay  the  expense  of  preparing  the  plates  for  printing 
their  notes.  It  is,  perhaps,  a  question  whether  banks  organized 
prior  to  the  passage  of  the  Act  of  June  20th,  1874,  can  be  required 
to  do  so.  The  Comptroller  of  the  Currenc}^  on  page  41  of  his  re- 
port for  1885,  makes  some  reference  to  this  matter  of  the  expense 
of  preparing  and  printing  National  bank  notes,  as  well  as  of  the 
expenses  of  the  Comptroller's  o£5ce,  and  the  National  bank  re- 
demption agency. 

53.  Annual  Examination  of  Plates,  Dies,  etc. 

Section  5174. — The  Comptroller  of  the  Currency  shall  cause  to  be  exam- 
ined, each  year,  the  plates,  dies,  but-pieces,  [bed-pieces,]  and  other  material 
from  which  the  National  bank  circulation  is  printed,  in  whole  or  in  part,  and 
file  in  his  office  annually  a  correct  list  of  the  same.  Such  material  as  shall 
have  been  used  in  the  printing  of  the  notes  of  associations  which  are  in 
liquidation,  or  have  closed  business,  shall  be  destroyed  under  such  regula- 
tions as  shall  be  prescribed  by  the  Comptroller  of  the  Currency  and  approved 
by  the  Secretary  of  the  Treasury.  The  expenses  of  any  such  examination 
or  destruction  shall  be  paid  out  of  any  appropriation  made  by  Congress  for 
the  special  examination  of  National  banks  and  bank-note  plates. 

54.    Issue  of  Small  Notes  Limited. 

Section  5175. — Not  more  than  one-sixth  part  of  the  notes  furnished  to 
any  association  shall  be  of  a  less  denomination  than  five  dollars.     After 


73 

specie  payments  are  resumed  no  association  shall  be  furnished  with  notes  of 
a  less  denomination  than  five  dollars. 

55.     Amount  of  Circulation  Limited. 

Section  5176. — No  banking  association  organized  subsequent  to  the  twelfth 
day  of  July,  eighteen  hundred  and  seventy,  shall  have  a  circulation  in  excess 
of  five  hundred  thousand  dollars.* 

56.    Aggregate  Amount  of  Circulating  Notes. 

Section  5177. — The  aggregate  amount  of  circulating  notes  issued  under 
the  act  of  February  twenty-five,  eighteen  hundred  and  sixty-three,  and 
under  the  act  of  June  three,  eighteen  hundred  and  sixty-four,  and  under 
section  one  of  the  act  of  July  twelve,  eighteen  hundred  and  seventy,  and 
under  this  Title,  shall  not  exceed  three  hundred  and  fifty-four  milhons  of 
dollars. 

Superseded  by  Act  of  January  14th,  1875,  sec  3,  par.  168. 

No  limit  now  on  the  aggregate  circulation  which  may  be  issued. 
National  bank  circulation  is  at  present  kept  down  by  competition 
of  Government  paper   and  by   the  retention  of  the  war  tax  on 

circulation. 

57.    Apportionment  of  Circulating  Notes. 

Section  5178. — One  hundred  and  fifty  milhons  of  dollars  of  the  entire 
amount  of  circulating  notes  authorized  to  be  issued  shall  be  apportioned  to 
associations  in  the  States,  in  the  Territories,  and  in  the  District  of  Columbia, 
according  to  representative  population.  One  hundred  and  fifty  millions  shall 
be  apportioned  by  the  Secretary  of  the  Treasury  among  associations  formed 
in  the  several  States,  in  the  Territories,  and  in  the  District  of  Columbia, 
having  due  regard  to  the  ex'isting  banking  capital,  resources,  and  business  of 
such  States,  Territories,  and  District.  The  remaining  fifty-four  millions  shall 
be  apportioned  among  associations  in  States  and  Territories  having,  under 
the  apportionments  above  prescribed,  less  than  their  full  proportion  of  the 
aggregate  amount  ot  notes  authorized,  which  made  due  application  for  circu- 
lating notes  prior  to  the  twelfth  day  of  July,  eighteen  hundred  and  seventy- 
one.  Any  remainder  of  such  fifty-four  millions  shall  be  issued  to  banking 
associations  applying  for  circulating  notes  in  other  States  or  Territories  having 
less  than  their  proportion. 

Obsolete.  Superseded  by  Act  of  January  14th,  1875,  sec.  3, 
par.  168. 


*  Repealed  by  Act  of  July  12th,  1882,  sec.  10,  par.  194. 


74 

58.    Distribution  of  Circulating  Notes. 

Section  5179. — In  order  to  secure  a  more  equitable  distribution  of  the 
National  banking  currency,  there  may  be  issued  circulating  notes  to  banking 
associations  organized  in  States  and  Territories  having  less  than  their  pro- 
portion, and  the  amount  of  circulation  herein  authorized  shall,  under  the 
direction  of  the  Secretary  of  the  Treasury,  as  it  may  be  required  for  this 
purpose,  be  withdrawn,  as  herein  provided,  from  banking  associations  organ- 
ized in  States  having  more  than  their  proportion,  but  the  am.ount  so  with- 
drawn shall  not  exceed  twenty-five  million  dollars :  Provided,  That  no  circu- 
lation shall  be  withdrawn  under  the  provisions  of  this  section  until  after  the 
fifty-four  miUions  granted  in  the  first  section  of  the  act  of  July  twelfth, 
eighteen  hundred  and  seventy,  sBall  have  been  taken  up. 

Obsolete.  Superseded  by  Act  of  January  14th,  1875,  sec.  2>r 
par.  168. 

See  Act  of  June  2otb,  1874,  sec.  7,  par.  162. 

59.    Withdrawing  Excess  of  Circulation. 

Section  5180. — The  Comptroller  of  the  Currency  shall,  under  the  direc- 
tion of  the  Secretary  of  the  Treasury,  make  a  statement  showing  the  amount 
of  circulation  in  each  State  and  Territory,  and  the  amount  necessary  to  be 
withdrawn  from  each  association,  and  shall  forthwith  make  a  requisition  for 
such  amount  upon  such  associations,  commencing  with  those  having  a 
circulation  exceeding  one  million  of  dollars,  in  States  having  an  excess 
of  circulation,  and  withdrawing  their  circulation  in  excess  of  one  million 
of  dollars,  and  then  proceeding  proportionately  with  other  associations 
having  a  circulation  exceeding  three  hundred  thousand  dollars,  in  States 
having  the  largest  excess  of  circulation,  and  reducing  the  circulation  of  such 
associations  in  States  having  the  greatest  proportion  in  excess,  leaving  undis- 
turbed the  associations  in  States  having  a  smaller  proportion,  until  those  in 
greater  excess  have  been  reduced  to  the  same  grade,  and  connnuing  thus  to 
make  such  reductions  until  the  full  amount  of  twenty-five  millions  has  been 
withdrawn  ;  and  the  circulation  so  withdrawn  shall  be  distributed  among  the 
States  and  Territories  having  less  than  their  proportion,  so  as  to  equaUze  the 
same.  Upon  failure  of  any  association  to  return  the  amount  of  circulating 
notes  so  required,  v/ithin  one  year,  the  Comptroller  shall  sell  at  public  auc- 
tion, having  given  twenty  days'  notice  thereof  in  one  daily  newspaper  printed 
in  Washington  and  one  in  New  York  city,  an  amount  of  the  bonds  deposited 
by  that  association  as  security  for  its  circulation,  equal  to  the  circulation 
required  to  be  withdrawn  from  the  association  and  not  returned  in  com- 
pliance with  such  requisition;  and  he  shall,  with  the  proceeds,  redeem  so 
many  of  the  notes  of  such  association,  as  they  come  into  the  Treasury,  as 
will  equal  the  amount  required  and  not  returned ;  and  shall  pay  the  balance;, 
if  any,  to  the  association. 

Obsolete.     See  Act  of  January  i4tb,  1875,  sec.  3,  par.  168. 


75 

6o.    Removal  of  Associations. 

Section  5181. — Any  association  located  in  any  State  having  more  than  its 
proportion  of  circulation  may  be  removed  to  any  State  having  less  than  its 
proportion  of  circulation,  under  such  rules  and  regulations  as  the  Comptroller 
of  the  Currency,  with  the  approval  of  the  Secretary  of  the  Treasury,  shall  pre- 
scribe: Provided,  That  the  amount  of  the  issue  of  said  banks  shall  not  be 
deducted  from  the  issue  of  fifty-four  millions  mentioned  in  section  five 
thousand  one  hundred  and  seventy-eight. 

Obsolete.  See  Act  of  January  14th,  1875,  sec.  3,  par.  168. 
Changes  of  location  can  now  be  made  within  certain  limits  on  ap- 
proval of  the  Comptroller  (see  Act  of  May  ist,  1886),  otherwise  only 
by  Act  of  Congress. 

61.    Circulating  Notes  :  for  What  Receivable. 

SEcnON  5182. — After  any  association  receiving  circulating  notes  under  this 
Title  has  caused  its  promise  to  pay  such  notes  on  demand  to  be  signed  by 
the  president  or  vice-president  and  cashier  thereof,  in  such  manner  as  to  make 
them  obligatory  promissory  notes,  payable  on  demand,  at  its  place  of  busi- 
ness, such  association  may  issue  and  circulate  the  same  as  money.  And  the 
same  shall  be  received  at  par  in  all  parts  of  the  United  States  in  payment  of 
taxes,  excises,  public  lands,  and  all  other  dues  to  the  United  States,  except 
duties  on  imports ;  and  also  for  all  salaries  and  other  debts  and  demands 
owing  by  the  United  States  to  individuals,  corporations,  and  associations 
within  the  United  States,  except  interest  on  the  pubUc  debt,  and  in  redemp- 
tion of  the  National  currency. 

Signing  Circulating  Notes. — Stamped  signatures  affixed  by 
the  oflBcers  themselves  would  be  sufficient  to  make  the  notes 
' '  obligatory  promissory  notes, ' '  and  probably  printed  or  engraved 
signatures  would  also  suflSce  for  this  purpose.'  But  Congress,  no 
doubt,  had  in  view  the  usual  manner  in  which  promissory  notes 
are  signed ;  that  is,  by  the  manual  signature  of  the  maker,  and 
intended  that  the  notes  of  the  banks  should  be  signed  in  this  way. 
There  appears,  however,  to  be  no  penalty  for  having  printed 
signatures  rather  than  written  ones,  as  the  Comptroller  has  in 
some  of  his  reports  recommended  a  law  imposing  a  penalt5\  It 
is  often  a  great  task  to  sign  these  notes  in  quantities,  and  perhaps  a 
provision  of  law  authorizing  the  printing  of  signatures,  under 
certain  conditions,  upon  the  notes  of  smaller  denominations, 
might  have  a  tendency  to  cause  a  larger  circulation  of  National- 
bank  notes. 

Banks  Liable  without  Signatures. — The  Act  of  July  28th, 


76 

1892,  provides  that  the  bank  shall  be  liable  for  all  notes  issued 
to  it  though  unsigned.     (See  Act  of  July  12,  1892,  par.  211.) 

62.    Issue  of  Other  Notes  Prohibited. 

Section  5183. — No  National  banking  association  shall  issue  post-notes  or 
any  otlier  notes  to  circulate  as  money  than  such  as  are  authorized  by  the  pro- 
visions of  this  Title. 

Applies  to  Circulating  Notes. — In  the  revision  of  the  United 
States  Statutes  the  words  ''posi-uotes"  were  omitted,  but  were 
afterward  put  back  by  the  act  of  February  the  i8th,  1875. 
This  section  applies  only  where  the  instruments  are  issued  to 
"circulate  as  money,"  and  where  this  is  not  the  purpose  they  are 
not  within  the  prohibition.  (Hunt  z>.  Appellant,  etc.,  141  Mass., 
515;  Riddle  ?'.  First  National  Bank,  27  Fed.  Rep.,  503.)  Thus,  it 
has  been  held,  that  this  section  does  not  forbid  the  issue  of  certifi- 
cates of  deposit.  (See  cases  cited  above.)  Nor  does  it  forbid  the 
certification  of  checks,  although  the  purpose  of  a  certification,  by 
making  the  check  primarily  the  obligation  of  the  bank,  is  to  give 
it  currency,  so  that  it  may  pass  freely  from  hand  to  hand.  (See 
Merchants'  National  Bank  v.  State  National  Bank,  10  Wallace, 
604.)  The  use  of  the  term  "post-notes"  appears  to  have  been  the 
cause  of  some  misapprehension  as  to  the  meaning  of  this  section. 
Doubtless  many  obligations  issued  by  National  banks  for  money 
borrowed  do  come  within  the  definition  of  a  post-note,  but  the 
term  is  to  be  taken  in  connection  with  the  words  ' '  to  circulate  as 
money,"  which  limit  the  prohibition  to  post-notes  issued  for  that 
purpose. 

63.    Destroying  and  Replacing  Mutilated  Notes. 

Section  5184. — It  shall  be  the  duty  of  the  Comptroller  of  the  Currency  to 
receive  worn-out  or  mutilated  circulating  notes  issued  by  any  banking  asso- 
ciation, and  also,  on  due  proof  of  the  destruction  of  any  such  circulating 
notes,  to  deliver  in  place  thereof  to  the  association  other  blank  circulating 
notes  to  an  equal  amount.  Such  worn-out  or  mutilated  notes,  after  a  memo- 
randum has  been  entered  in  the  proper  books,  in  accordance  with  such  regu- 
lations as  may  be  established  by  the  Comptroller,  as  well  as  all  circulating 
notes  which  shall  have  been  paid  or  surrendered  to  be  canceled,  shall  be 
burned*  to  ashes  in  presence  of  four  persons,  one  to  be  appointed  by  the 
Secretary  of  the  Treasury,  one  by  the  Comptroller  of  the  Currency,  one  by 
the  Treasurer  of  the  United  States,  and  one  by  the  association,  under  such 
regulations  as  the  Secretary  of  the  Treasury  may  prescribe.     A  certificate  of 

*  Modified  by  Act  of  June  23,  1874,  par.  165. 


17 

such  burning,  signed  by  the  parties  so  appointed,  shall  be  made  in  the  books 
of  the  Comptroller,  and  a  duplicate  thereof  forwarded  to  the  association 
whose  notes  are  thus  canceled. 

Merchants'  Bank  v.  State  Bank,  lo  Wall.,  604. 

This  section  provides  for  the  security  of  the  destruction  of  notes 
of  banks  at  a  distance  from  their  principals.  The  checks  provided 
appear  to  be  adequate.  The  details  of  the  process  are  given  else- 
where in  this  work.     (See  page  278.) 

64.     National   Gold  Banks. 

Section  5185. — Associations  may  be  organized  in  the  manner  prescribed 
by  this  Title  for  the  purpose  of  issuing  notes  payable  in  gold  ;  and  upon  the 
deposit  of  any  United  States'-'  bonds  bearing  interest  payable  in  gold  with 
the  Treasurer  of  the  United  States,  in  the  manner  prescribed  for  other  asso- 
ciations, it  shall  be  lawful  for  the  Comptroller  of  the  Currency  to  issue  to  the 
association  making  the  depcfeit  circulating  notes  of  different  denominations, 
but  none  of  them  of  less  than  five  dollars,  and  not  exceeding  in  amount 
eighty  per  centum  of  the  par  value  of  the  bonds  deposited,  which  shall  ex- 
press the  promise  of  the  association  to  pay  them,  upon  presentation  at  the 
office  at  which  they  are  issued,  in  gold  coin  of  the  United  States,  and  shall 
be  so  redeemable.  But  no  such  association  shall  have  a  circulation  of  more 
than  one  million  of  doUars.f 

There  are  now  no  gold  banks  in  existence,  although  it  may 
again  become  profitable  to  organize  them.  The  resumption  of 
specie  payments  placed  all  National  banks  on  a  gold  basis  and  the 
special  gold  banks  at  a  disadvantage  in  the  issue  of  circulation. 

65.     Reserve  Required  of  Gold  Banks. 

Section  5186. — Every  association  organized  under  the  preceding  section 
shall  at  all  times  keep  on  hand  not  less  than  twenty-five  per  centum  of  its 
outstanding  circulation,  in  gold  or  silver  coin  of  the  United  States ;  and  shall 
receive  at  par  in  the  payment  of  debts  the  gold  notes  of  every  other  such 
association  which  at  the  time  of  such  payment  is  redeeming  its  circulating 
notes  in  gold  coin  of  the  United  States,  and  shall  be  subject  to  all  the  provisions 
of  this  Title  :  Provided,  That,  in  applying  the  same  to  associations  organized 
for  issuing  gold  notes,  the  terms  "  lawful  money  "  and  "  lawful  money  of  the 
United  States"  shall  be  construed  to  mean  gold  or  silver  coin  of  the  United 
States ;  and  the  circulation  of  such  association  shall  not  be  within  the  limita- 
tion of  circulation  mentioned  in  this  Title.  J 

See  previous  section  and  remarks. 

*See  Act  of  February  14,  1880,  par.  184. 
f  See  Act  of  January  19,  1875,  par.  169. 
J  Section  5187,  par.  135. 


78 

66.    Penalties  for  Imitating  National-Bank  Notes,  etc. 

Section  5188. — It  shall  not  be  lawful  to  design,  engrave,  print,  or  in  any 
manner  make  or  execute,  or  to  utter,  issue,  distribute,  circulate,  or  use,  any 
business  or  professional  card,  notice,  placard,  circular,  hand-hill,  or  advertise- 
ment, in  the  hkeness  or  similitude  of  any  circulating  note  or  other  obligation 
or  security  of  any  banking  association  organized  or  acting  under  the  laws  of 
the  United  States  which  has  been  or  may  be  issued  under  this  Title,  or  any 
act  of  Congress,  or  to  write,  print,  or  otherwise  impress  upon  any  such  note, 
obligation,  or  security  any  business  or  professional  card,  notice,  or  advertise- 
ment, or  any  notice  or  advertisement  of  any  matter  or  thing  whatever.  Every 
person  who  violates  this  section  shall  be  liable  to  a  penalty  of  one  hundred 
dollars,  recoverable  one-half  to  the  use  of  the  informer. 

This  section  is  to  prevent  the  deluding  of  ignorant  and  unwary 
people,  and  to  avoid  bringing  the  National  system  into  discredit 
even  collaterally. 

67.    Penalty  for  Mutilating  Notes,  etc. 

Section  5189. — Every  person  who  mutilates,  cuts,  defaces,  disfigures,  or 
perforates  with  holes,  or  unites  or  cements  together,  or  does  any  other  thing 
to  any  bank-bill,  draft,  note,  or  other  evidence  of  debt,  issued  by  any  Na- 
tional banking  association,  or  who  causes  or  procures  the  same  to  be  done, 
with  intent  to  render  such  bank-bill,  draft,  note,  or  other  evidence  of  debt 
unfit  to  be  re-issued  by  said  association,  shall  be  liable  to  a  penalty  of  fifty 
dollars,  recoverable  by  the  association. 

This  is  to  prevent  malicious  mischief. 


CHAPTER  IV. 


REGULATION  OF  THE  BANKING  BUSINESS. 


68.    Place  of  Business. 

Section  5190, — The  usual  business  of  each  National  banking  association 
shall  be  transacted  at  an  office  or  banking-house  located  in  the  place  speci- 
fied in  its  organization  certificate. 

Place  of  Business. — This  provision  must  be  construed  reason- 
ably ;  and  where  a  part  of  the  legitimate  business  of  the  bank  can 
not  be  transacted  at  the  banking-house  it- may  be  done  elsewhere. 
(Merchants'  National  Bank  v.  State  National  Bank,  10  Wallace 
604.)  In  the  important  case  of  Merchants'  National  Bank  v. 
State  National  Bank,  above  cited,  the  cashier  of  the  defendant 
bank  bought  a  quantity  of  gold  of  the  plaintiff  bank,  and  gave  a 
certified  check  therefor.  The  transaction  took  place  at  the  ofiice 
of  the  plaintiff  bank,  and  the  check  was  certified  there.  It  was 
objected  by  the  defendant  that  the  certification  was  not  good, 
because  not  made  by  the  cashier  at  the  defendant's  own  banking- 
house.  But  it  was  held  that  there  was  no  force  in  this  objection. 
The  court  said  :  ' '  The  provision  of  the  act  of  Congress  as  to  the 
place  of  business  of  the  banks  created  under  it  must  be  construed 
reasonably.  The  business  of  every  bank  away  from  its  office — 
frequently  large  and  important — is  unavoidably  done  at  the  proper 
place  by  the  cashier  in  person,  or  by  correspondents  or  other 
agents.  In  the  case  before  us,  the  gold  must  have  been  bought,  if 
at  all,  at  the  buying  or  the  selling  bank,  or  at  some  third  locality." 

Branch  Office. — The  question  often  arises  whether  a  bank  may 
have  a  branch  office  for  the  purpose  of  receiving  deposits,  paying 
checks,  etc.,  in  the  same  or  a  different  place.  Perhaps,  the  bank 
might  have  such  a  branch  in  the  same  town  or  city,  but  clearly  it 
could  not  establish  a  branch  office  elsewhere,  (Armstrong  v. 
Second  National  Bank,  38  Fed.  Rep.,  883.)  In  the  case  cited  a 
National  bank  in  Cincinnati  had  made  an  arrangement  with  a 
bank  in  Springfield,  Ohio,  by  which  the  latter  bank  was  to  cash 
checks  drawn  on  the  Cincinnati  bank  by  customers  living   in 

79 


8o 

Springfield.  This  arrangement  was  held  by  the  court  to  be  void,, 
on  several  grounds,  among  others,  that  it  is  not  competent  for  a 
National  bank  to  provide  for  the  cashing  of  checks  upon  it  at  any 
other  place  than  an  office  or  banking-house  located  in  the  place 
specified  in  its  organization  certificate.  By  the  Act  of  May  12, 
1892,  Chicago  bankers  were  authorized  to  establish  branches  at 
the  World's  Columbian  Exposition.  (See  posi,  par.  210.)  [See 
also  Supplement.] 

69.     Requirements  as  to  Lawful=Money   Reserve.* 

Section  5191. — Every  National  banking  association  in  either  of  the  follow- 
ing cities  :  Albany,  Baltimore,  Boston,  Cincinnati,  Chicago,  Cleveland,  De- 
troit, Louisville,  Milwaukee,  New  Orleans,  New  York,  Philadelphia,  Pitts- 
burg, St.  Louis,  San  Francisco,  and  Washington,  shall  at  all  times  have  on 
hand,  in  lawful  money  of  the  United  States,  an  amount  equal  to  at  least 
twenty-five  per  centum  of  the  aggregate  amount  of  its  notes  in  circulation 
and  its  deposits ;  and  every  other  association  shall  at  all  times  have  on  hand, 
in  lawful  money  of  the  United  States,  an  amount  equal  to  at  least  fifteen  per 
centum  of  the  aggregate  amount  of  its  notes  in  circulation,  and  of  its  deposits. 
Whenever  the  lawful  money  of  any  association  in  any  of  the  cities  named 
shall  be  below  the  amount  of  twenty-five  per  centum  of  its  circulation  and 
deposits,  and  whenever  the  lawful  money  of  any  other  association  shall  be 
below  fifteen  per  centum  of  its  circulation  and  deposits,  such  association  shall 
not  increase  its  liabilities  by  making  any  new  loans  or  discounts  otherwise 
than  by  discounting  or  purchasing  bills  of  exchange  payable  at  sight,  nor 
make  any  dividend  of  its  profits  until  the  required  proportion,  between  the 
aggregate  amount  of  its  outstanding  notes  of  circulation  and  deposits  and 
its  lawful  money  of  the  United  States,  has  been  restored.  And  the  Comp- 
troller of  the  Currency  may  notify  any  association,  whose  lawful-money 
reserve  shall  be  below  the  amount  above  required  to  be  kept  on  hand,  to 
make  good  such  reserve ;  and  if  such  association  shall  fail  for  thirty  days 
thereafter  so  to  make  good  its  reserve  of  lawful  money,  the  Comptroller  may, 
with  the  concurrence  of  the  Secretary  of  the  Treasury,  appoint  a  receiver 
to  wind  up  the  business  of  the  association,  as  provided  in  section  fifty-two 
hundred  and  thirty-four. 

Obsolete  Provision. — Section  2  of  the  Act  of  June  20,  1874, 
page  165,  relieves  National  banks  of  the  necessity  of  keeping  re- 
serve upon  circulation,  but  it  is  still  required  on  deposits. 

Calculating  Reserve,  etc. — The  method  of  calculating  reserve, 
and  the  funds  available  therefor,  are  fully  treated  of  elsewhere  in 
this  work.     (See  pages  257-270.) 

*See  Sections  5191,  5192,  5195,  Act  of  June  20,  1874;  Sections  2  and  3, 
Act  of  July  12,  1882;  Section  12,  Act  of  March  3,  1887  ;  Act  of  July  14,  1890. 


8i 

70.      Redemption  Cities  and   Reserve  Required.* 

Section  5192. — Three-fifths  of  the  reserve  of  fifteen  per  centum  required 
by  the  preceding  section  to  be  kept,  may  consist  of  balances  due  to  an  asso- 
ciation, available  for  the  redemption  of  its  circulating  notes,  from  associations 
approved  by  the  Comptroller  of  the  Currency,  organized  under  the  act  oi 
June  three,  eighteen  hundred  and  sixty-four,  or  under  this  Title,  and  doing 
business  in  the  cities  of  Albany,  Baltimore,  Boston,  Charleston,  Chicago, 
Cincinnati,  Cleveland,  Detroit,  Louisville,  Milwaukee,  New  Orleans,  New 
York,  Philadelphia,  Pittsburg,  Richmond,  St.  Louis,  San  Francisco,  and 
Washington.  Clearing-house  certificates,  representing  specie  or  lawful 
money  specially  deposited  for  the  purpose,  of  any  clearing-house  association, 
shall  also  be  deemed  to  be  lawful  money  in  the  possession  of  any  association 
belonging  to  such  clearing-house,  holding  and  owning  such  certificate,  within 
the  preceding  section. 

71.    United  States  Certificates   of   Deposit  as  Reserve. 

Section  5193. — The  Secretary  of  the  Treasury  may  receive  United  States 
notes  on  deposit,  without  interest,  from  any  National  banking  associations,  in 
sums  of  not  less  than  ten  thousand  dollars,  and  issue  certificates  therefor  in 
such  form  as  he  may  prescribe,  in  denominations  of  not  less  than  five  thou- 
stand  dollars,  and  payable  on  demand  in  United  States  notes  at  the  place 
where  the  deposits  were  made.  The  notes  so  deposited  shall  not  be  counted 
as  part  of  the  lawful-money  reserve  of  the  association  ;  but  the  certificates 
issued  therefor  may  be  counted  as  part  of  its  lawful-money  reserve,  and  may 
be  accepted  in  the  settlement  of  clearing-house  balances  at  the  places  where 
the  deposits  therefor  were  made. 

72.     Issue  of  Certificates  of  Deposit. 

Section  5194. — The  power  conferred  on  the  Secretary  of  the  Treasury,  by 
the  preceding  section,  shall  not  be  exercised  so  as  to  create  any  expansion  or 
contraction  of  the  currency.  And  United  States  notes  for  which  certificates 
are  issued  under  that  section,  or  other  United  States  notes  of  like  amount, 
shall  be  held  as  special  deposits  in  the  Treasury,  and  used  only  for  redemp- 
tion of  such  certificates. 

73.     Redemption  of  Circulating  Notes. 

Section  5195. — Each  association  organized  in  any  of  the  cities  named  in 
section  fifty-one  hundred  and  ninety-one  shall  select,  subject  to  the  approval 
of  the  Comptroller  of  the  Currency,  an  association  in  the  city  of  New  York, 
at  which  it  will  redeem  its  circulating  notes  at  par;  and  may  keep  one-half 
of  its  lawful-money  reserve  in  cash  deposits  in  the  city  of  New  York.  But  the 
foregoing  provision  shall  not  apply  to  associations  organized  and  located  in 
the  city  of  San  Francisco  for  the  purpose  of  issuing  notes  payable  in  gold. 


*  See  references  under  previous  sections.  t  Repealed  by  Act  Mch.  14,  1900. 

6 


82 

Each  association  not  organized  within  the  cities  named,  shall  select,  subject 
to  the  approval  of  the  Complroller,  an  association  in  either  of  the  cities 
named,  at  which  it  will  redeem  its  circulating  notes  at  par.  The  Comptroller 
shall  give  public  notice  of  the  names  of  the  associations  selected,  at  which 
redemptions  are  to  be  made  by  the  respective  associations,  and  of  any  change 
that  may  be  made  of  the  association  at  which  the  notes  of  any  association  are 
redeemed.  Whenever  any  association  fails  either  to  make  the  selection  or  to 
redeem  its  notes  as  aforesaid,  the  Comptroller  of  the  Currency  may,  upon 
receiving  satisfactory  evidence  thereof,  appoint  a  receiver  in  the  manner  pro- 
vided for  in  section  fifty-two  hundred  and  thirty-four,  to  wind  up  its  affairs. 
But  this  section  shall  not  relieve  any  association  from  its  liability  to  redeem 
its  circulating  notes  at  its  own  counter,  at  par,  in  lawful  money  on  demand. 

Obsolete  Provision. — The  provisions  of  this  section  having  re- 
ference to  the  redemption  of  circulating  notes  and  the  selection  of 
an  association  at  which  it  will  redeem  its  circulating  notes  at  par, 
have  been  superseded  by  the  provisions  of  Section  3  of  the  Act  of 
June  20,  1874. 

Redemption  of  Notes. — As  the  provisions  for  the  redemption 
of  notes  in  New  York  or  other  cities  did  not  relieve  a  National 
bank  from  the  necessity  of  redeeming  the  circulating  notes,  in 
lawful  money  at  its  own  counter,  so  it  is  held  that  the  present 
system  of  redeeming  circulating  notes  at  the  United  States  Trea- 
sury does  not  relieve  National  banks  of  the  necessity  of  redeeming 
their  notes  at  their  own  counter. 


Reserve  Agents. — This  section  gives  banks  in  certain  cities 
permission  to  keep  one-half  of  their  lawful-money  reserve  in  cash 
deposits  in  New  York.  It  was  the  custom  under  this  section  to 
select  certain  associations  in  New  York  or  other  cities  as  redemp- 
tion agencies,  and  obtain  the  approval  of  the  Comptroller ;  and  it 
seems  to  have  been  generally  acceded  to,  that  these  approved  re- 
demption agencies  were  the  only  banks  in  New  York  or  other 
reserve  cities  where  the  reserves  of  National  banks  could  be  kept. 
When  the  law  requiring  these  redemption  agencies  was  repealed, 
the  Comptroller's  office  still  continued  to  require  banks  in  the 
cities  named  to  select  particular  banks  in  New  York  city  at  which 
it  was  the  intention  to  keep  a  portion  of  their  reserve.  The  Act  of 
March  3d,  1887,  accorded  to  associations  located  in  Chicago  and 
St.  lyouis  the  same  privileges  as  those  of  the  New  York  city  banks. 


83 

74-     NationaUBank  Notes  a  Legal  Tender. 

Section  5196. — Every  National  banking  association  formed  or  existing 
under  this  Title,  shall  take  and  receive  at  par,  for  any  debt  or  liability  to  it, 
any  and  all  notes  or  bills  issued  by  any  lawfully  organized  National  banking 
association.  But  this  provision  shall  not  apply  to  any  association  organized 
for  the  purpose  of  issuing  notes  payable  in  gold. 

This  section  makes  National-bank  notes  legal  tender  to  any  Na- 
tional bank.  National-bank  notes  are  redeemable  in  lawful  money  ; 
that  is,  in  gold,  silver  dollars,  or  legal-tender  notes ;  and  it  will 
readily  be  seen  that  any  depreciation  of  the' character  of  lawful 
money — as,  for  instance,  the  substitution  of  an  inferior  dollar  for 
our  present  standard — is  of  the  utmost  importance  to  National 
banks.  As  there  are  no  gold  banks  now  in  existence,  the  last 
clause  of  this  section  has,  at  present,  no  importance. 

75.    Rate  of  Interest  Limited. 

Section  5197. — Any  association  may  take,  receive,  reserve,  and  charge  on 
any  loan  or  discount  made,  or  upon  any  note,  bill  of  exchange,  or  other  evi- 
dences of  debt,  interest  at  the  rate  allowed  by  the  laws  of  the  State,  Terri- 
tory, or  district  where  the  bank  is  located,  and  no  more,  except  that  where 
by  the  laws  of  any  State  a  different  rate  is  limited  for  banks  of  issue  organ- 
ized under  State  laws,  the  rate  so  hmited  shall  be  allowed  for  associations 
organized  or  existing  in  any  such  State  under  this  Title.  When  no  rate  is  fixed 
by  the  laws  of  the  State,  or  Territory,  or  district,  the  bank  may  take,  receive, 
reserve,  or  charge  a  rate  not  exceeding  seven  per  centum,  and  such  interest 
may  be  taken  in  advance,  reckoning  the  days  from  which  the  note,  bill,  or 
other  evidence  of  debt  has  to  run.  And  the  purchase,  discount,  or  sale  of  a 
bona-fide  bill  of  exchange,  payable  at  another  place  than  the  place  of  such 
purchase,  discount,  or  sale,  at  not  more  than  the  current  rate  of  exchange 
for  sight-drafts  in  addition  to  the  interest,  shall  not  be  considered  as  taking 
or  receiving  a  greater  rate  of  interest. 

State  Rate  Limit. — This  section  allows  National  banks  to 
charge  the  rate  of  interest  allowed  by  the  State  to  natural  persons 
generally,  and  a  higher  rate  if  State  banks  of  issue  are  authorized 
to  charge  a  higher  rate.  (Tiflfany  v.  National  Bank,  18  Wallace, 
409.)  The  Supreme  Court  of  the  United  States  has  explained  the 
meaning  of  this  section  as  follows:  "  It  was  expected  that  they 
[the  National  banks]  would  come  into  competition  with  State 
banks,  and  it  was  intended  to  give  them  at  least  equal  advantages 
in  such  competition.  In  order  to  accomplish  this  they  were  em- 
powered to  reserve  interest  at  the  same  rates,  whatever  those  rates 


84 

might  be,  which  were  allowed  to  similar  State  institutions.  This 
was  considered  indispensable  to  protect  them  against  possible 
unfriendly  State  legislation.  Obviously,  if  State  statutes  should 
allow  to  their  banks  of  issue  a  rate  of  interest  greater  than  the  or- 
dinary rate  allowed  to  natural  persons,  National  banking  associa- 
tions could  not  compete  with  them,  unless  allowed  the  same.  On 
the  other  hand,  if  such  associations  were  restricted  to  the  rates 
allowed  by  the  statutes  of  the  State  to  banks  which  might  be 
authorized  by  the  State  laws,  unfriendly  legislation  might  make 
their  existence  in  the  State  impossible.  A  rate  of  interest  might 
be  prescribed  so  low  that  banking  could  not  be  carried  on,  except 
at  a  certain  loss."     {Id.) 

General  State  Rate  Governs. — But  it  is  the  rate  of  interest 
allowed  to  the  banks  of  the  State  generally  that  a  National  bank 
may  charge ;  and  the  fact  that  a  few  of  the  State  banks  are  speci- 
ally authorized  to  take  a  higher  rate  does  not  warrant  the  National 
banks  in  doing  the  same.  (Gruber  v.  First  National  Bank,  87 
Penn  St.,  468  ;  Duncan  v.  First  National  Bank  of  Mount  Pleasant, 
II  Bankers'  Magazine,  787.  But  see  First  National  Bank  of 
Mount  Pleasant  v.  Tinstman,  36  Legal  Intelligencer,  228.)  Nor 
is  it  to  be  understood  that  whatever  by  the  laws  of  the  State  is 
lawful  for  natural  persons  in  acquiring  title  to  negotiable  paper  is 
lawful  for  National  banks.  (National  Bank  v.  Johnson,  104  U.  S., 
271.)  Thus,  though  the  State  law  fixes  no  limit  to  the  rate  which 
natural  persons  may  take  for  the  discount  or  purchase  of  business 
paper,  this  does  not  authorize  the  National  banks  to  discount  such 
paper  at  a  higher  than  the  legal  rate.  (Johnson  v.  National  Bank 
of  Gloversville,  74  N.  Y.,  329;  afl&rmed  in  National  Bank  v.  John- 
son, 104  U.  S.,  271.) 

Seven  Per  Cent.  Limit. — And  where  the  State  law  does  not 
limit  the  rate  of  interest  which  may  be  charged  on  loans  to  cor- 
porations, a  National  bank  located  in  that  State  can  not  charge 
more  than  7  per  cent,  on  such  loans.  {In  re  Wild,  11  Blatchford, 
243.)  But  it  has  been  held  that  if  the  statutes  of  the  State  ex- 
pressly authorize  parties  to  contract  for  any  rate  of  interest.  Na- 
tional banks  may  do  likewise,  and  are  not,  in  such  case,  limited 
to  7  per  cent.  (Hinds  v.  Marmelejo,  60  Cal.,  229  ;  National  Bank 
V.  Bruhn,  64  Tex.,  571  ;  Rockwell  v.  Farmers'  National  Bank,  4 
Colo.,    App.,    562;    Wolverton  v.   Exchange  National    Bank,   11 


85 

Wash.,  94;  Yakina  National  Bank  v.  Kinne,  6  Wash  ,  348;  Guild 
V.  First  National  Bank  of  Deadwood,  4  S.  D.,  566.)  Where  a 
State  statute  fixes  a  certain  rate  as  the  legal  rate,  but  authorizes 
parties  to  agree  in  writing  for  a  higher  rate,  the  National  banks 
are  permitted  to  charge  such  higher  rate.  (,Wiley  v.  Starbuck, 
44  Ind  ,  298;  Newell  v.  National  Bank  of  Somerset,  12  Bush,  57.) 
A  National  bank  in  Mississippi  is  not  allowed  to  retain  interest  in 
advance,  but  can  charge  interest  only  on  the  sum  actually  loaned. 
(Timberlake  z'.  First  National  Bank,  43  Fed.  Rep.,  231.)  A  Na- 
tional bank  located  in  Ohio  may,  since  the  repeal  of  the  statute  of 
that  State,  fixing  the  rate  of  interest  for  banks  of  issue,  reserve 
and  charge  interest  at  the  rate  of  eight  per  cent.  (La  Dow  v.  First 
National  Bank  of  New  lyondou,  51  Ohio  St.,  234.) 

Agreement  With  Customer.— The  bank  and  its  customer 
have  the  right  to  agree  as  to  the  time  of  entering  credits,  and  if 
such  agreement  is  made  in  good  faith  to  equalize  the  interest  on 
diflferent  items,  and  not  for  the  purpose  of  receiving  illegal  inter- 
est, it  is  not  a  violation  of  the  law.  (Timberlake  v.  First  National 
Bank,  43  Fed.  Rep.,  231.)  Therefore,  where  drafts  are  from  time 
to  time  deposited  in  a  bank,  some  of  them  being  payable  on 
demand  and  some  on  time,  an  agreement  between  the  bank  and 
the  depositor  that  credits  shall  be  given  for  such  drafts  on  the 
day  after  their  deposit,  the  depositors  being  charged  with  the 
full  legal  rate  for  any  over-drafts,  does  not  constitute  usury,  when 
such  agreement  is  made  in  good  faith  in  order  to  save  involved 
calculations.     (/'^.) 

Where  payments  are  made  generally  to  a  National  bank  on  a 
promissory  note  which  includes  unlawful  interest,  the}'  will  be  ap- 
plied on  the  principal.  (Hall  v.  First  National  Bank  of  Fairfield, 
30  Neb.,  94.) 

In  a  case  in  the  United  States  Circuit  Court  of  Appeals  it  was 
held  that  where  a  National  bank  purchases  drafts  at  a  rate  of  dis- 
count larger  than  the  rate  of  interest  allowed  by  the  law  of  the 
State,  this  will  be  usurj^.  (Danforth  v.  National  State  Bank,  48 
Fed.  Rep.,  271.) 

The  inhibition  contained  in  this  section  is  general  and  forbids 
the  taking  of  usurious  interest  from  an  artificial,  as  well  as  from  a 
natural,  person.  (Albion  Bank  v.  Montgomery,  74  N.  W.  Rep., 
1102.) 

The  promise  of  the  Cashier  to  pay  interest  upon  a  deposit  at  aa 


86 

usurious  rate  will  not  bind  the  bank ;  but  the  bank  would  be 
bound  to  return  the  amount  actually  received  by  it.  (Hanson  v. 
Heard,  38  Atl.  Rep.,  788.) 

76.    Penalty  for  Taking  Usurious  Interest. 

Section  5198. — The  taking,  receiving,  reserving,  or  charging  a  rate  of 
interest  greater  than  is  allowed  by  the  preceding  section,  when  knowingly 
done,  shall  be  deemed  a  forfeiture  of  the  entire  interest  which  the  note,  bill, 
or  other  evidence  of  debt  carries  with  it,  or  which  has  been  agreed  to  be  paid 
thereon.  In  case  the  greater  rate  of  interest  has  been  paid,  the  person  by 
whom  it  has  been  paid,  or  his  legal  representatives,  may  recover  back,  in 
an  action  in  the  nature  of  an  action  of  debt,  twice  the  amount  of  the  interest 
thus  paid  from  the  association  taking  or  receiving  the  same ;  provided  such 
action  is  commenced  within  t>vo  years  from  the  time  the  usurious  transaction 
occurred. 

Intent  of  the  Law. — The  Supreme  Court  of  the  United  States 
has  analyzed  this  section  as  follows :  ' '  Two  categories  are  thus 
defined,  and  the  consequences  denounced,  (i)  Where  illegal  in- 
terest has  been  knowingly  stipulated  for,  but  not  paid,  then  only 
the  sum  lent,  without  interest,  can  be  recovered.  (2)  Where  such 
illegal  interest  has  beeti  paid,  then  twice  the  amount  so  paid  can 
be  recovered  in  a  penal  action  of  debt,  or  suit  in  the  nature  of  such 
action,  against  the  offending  bank,  brought  by  the  persons  pay- 
ing the  same,  or  their  legal  representatives."  (Barnet  i*.  Muncie 
National  Bank,  98  U.  S.,  855.) 

Remedy  "Where  Action  is  by  the  Bank. — Where  the  bank 
sues  to  recover  the  loan,  it  can  not,  if  there  has  been  usury,  and 
the  defendant  pleads  this  defense,  recover  any  interest  at  all,  but 
only  the  principal  of  the  loan.  (Barnet  v.  Muncie  National  Bank, 
98  U.  S.,  855.)  But  in  such  an  action  the  defendant,  if  he  has 
paid  the  usurious  interest,  can  not  avail  himself  of  such  payment 
as  a  set-off  or  counter-claim  against  the  principal  of  the  loan  sued 
on ;  but  he  must  bring  a  separate  action  therefor,  (Barnet  v. 
Muncie  National  Bank,  98  U.  S.,  855;  Peterborough  National 
Bank  v.  Childs,  133  N.  Y.,  248;  National  Bank  of  Auburn  v. 
Lewis,  81  N.  Y.,  15;  Ellis  v.  First  National  Bank  of  Olney,  11 
Bradw.,  275;  Rockwell  v.  Farmers'  National  Bank,  4  Colo.  App., 
562;  Huggin  V.  Citizens'  National  Bank,  6  Tex.  Civ.  App.,  33; 
Norfolk  National  Bank  v.  Schwenk,  46  Neb.,  381  ;  Marion  Na- 
tional Bank  v.  Thompson,  (Ky.)  40  S.  W.  Rep.,  903  ;  Cox  v.  Beck, 


87 

83  Fed.  Rep.,  269.)  And  usurious  interest  paid  on  renewing  a 
series  of  notes  can  not,  in  an  action  by  the  bank  on  the  last  of 
thera,  be  applied  in  satisfaction  of  the  debt,  (Driesbach  v.  Na- 
tional Bank,  104  U.  S.,  52.; 

What  Interest  Forfeited— Interest  after  Maturity.— Where 
the  instrument  carries  with  it  illegal  interest,  the  whole  interest 
is  forfeited,  and  not  merely  that  which  the  party  borrowing  may 
agree  to  pay.  The  usury  destroys  the  interest-bearing  power  of 
the  obligation,  and  there  is  no  point  of  time  from  which  it  can 
bear  interest.  Not  only  does  it  forfeit  the  interest  accruing  before 
maturity,  but  as  well  that  accruing  after  maturity  (lyUcas  v.  Gov- 
ernment National  Bank,  78  Penn  St.,  228;  Shunk  v.  First  Na- 
tional Bank  of  Galion,  22  Ohio  St.,  508;  National  State  Bank  v. 
Brainard,  6i  Hun,,  339;  First  National  Bank  v.  Grimes  (49  Kans. 
219,)  though  the  latter  rate  be  lawful  (Shafer  ?'.  First  National 
Bank,  53  Kans,,  614),  or  the  interest  which  otherwise  would 
accrue  by  law  upon  non-payment  after  maturity.  (Flenderson 
National  Bank  v.  Alves,  91  Ky.,  142,)  And  an  amount  paid  on 
the  paper  after  the  maturity  thereof  must  be  credited  on  the  prin- 
cipal without  regard  to  when  the  interest  thereon  accrued.  (Na- 
tional State  Bank  v.  Brainard,  61  Hun.,  339.)  By  charging  more 
than  legal  interest  on  over-drafts  the  bank  will  lose  the  right  to 
recover  any  interest  at  all.  (Third  National  Bank  of  Philadelphia 
V.  Miller,  90  Pa,  St,,  241.)  Where  a  National  Bank  has  re-discounted 
notes  at  a  usurious  rate  of  interest,  the  fact  that  the  bank  for 
which  the  re-discount  was  made  has  charged  illegal  interest  on 
those  notes  to  its  customers  will  not  affect  its  right  to  set  up  the 
defense  of  usury  in  an  action  by  the  re-discounting  bank.  (/'^/.) 
As  to  whether  a  National  bank  can  discount  a  note  containing  a 
provision  to  pay  an  attorney's  fee  if  suit  shall  be  brought  to  enforce 
payment,  see  Merchants'  National  Bank  v.  Sevier  (14  Fed.  Rep,, 
662). 

Renewals. — If  the  note  is  renewed  from  time  to  time,  no  por- 
tion of  the  usurious  interest  included  in  the  renewal  note  can  be 
recovered,  (First  National  Bank  of  Mead  Centre  v.  Grimes,  49 
Kans.,  219.)  And  the  usury  is  not  purged  by  settlements  and 
renewal  notes  without  additional  usury.  (Pickett  v.  Merchants' 
National  Bank  of  Memphis,  32  Ark.,  346.)  In  a  suit  upon  the 
last  renewal  the  bank  can  recover  only  the  principal  sum  originally 


88 

advanced.  (Snyder  z'.  Mount  Sterling  National  Bank,  94  Ky.,  231.) 
And  any  payments  made  upon  any  of  such  notes  will  be  applied 
to  the  principal.  {Id.)  And  even  though  the  interest  upon  the 
renewal  notes  has  been  reduced  to  the  legal  rate,  no  part  of  the 
same  can  be  recovered.  (Farmers'  and  Mechanics'  Bank  v.  Hoag^ 
land,  7  Fed.  Rep.,  159)  A  note  given  for  already  accrued  interest, 
in  part  usurious,  is  without  consideration  ;  and  suspension  of  the 
right  of  collection,  between  its  date  and  maturity,  in  no  way  operates 
to  supply  the  essential  element  otherwise  lacking.  (McGhee  v. 
First  National  Bank  of  Tobias,  40  Neb.,  92.)  But  in  order  to 
render  the  bank  liable  to  the  penalty  of  double  the  amount  of  in- 
terest paid  prescribed  by  this  section,  the  illegal  interest  must 
have  been  actually  paid ;  and  it  is  not  sufficient  that  it  was  carried 
into  renewal  notes.  (Brown  v.  Marion  National  Bank,  169  U.  S. 
416;   Osborn  v.  First  National  Bank,  175  Pa.  St.,  494.) 

Penalty  for  Taking  Usury—  Knowledge  of  Bank — Allega- 
tions of  Complaint. — To  subject  the  bank  to  the  penalty  for 
taking  usurious  interest  there  must  have  been  paid  not  only  a 
larger  rate  of  interest  than  that  allowed  by  law,  but  that  larger 
rate  must  have  been  knowingly  received.  (Timberlake  v.  First 
National  Bank,  43  Fed.  Rep.,  231.)  And  the  petition  or  complaint 
must  allege  that  it  was  knowingly  received.  (Henderson  v.  Alves, 
15  S.  W.  Rep.,  132;  Schuyler  National  Bank  v.  Bullong,  24  Neb., 
321.)  As  to  when  allegations  of  complaint  are  sufficient  to  sus- 
tain a  judgment  in  an  action  against  a  National  bank  for  exacting 
usurious  interest,  see  First  National  Bank  v.  Morgan  (132  U.  S., 
141),  Guild  V.  First  National  Bank  of  Deadwood,  (4  S.  D.,  566.) 

Amount  of  Penalty. — The  penalty   is  twice  the   amount   of 
interest  paid,  and  is  not  limited  to  twice  the  excess  above   the 
legal  rate.     (Henderson  National   Bank   r.   Alves,  91   Ky.,    142; 
Schuyler    National    Bank    v.    Bullong,    28    Neb.,    684;    Hill   v. 
National  Bank  of  Barre,  15  Fed.  Rep.,  432.)     [See  also  Supple- 
ment.] 

Payment  of  Interest — Statute  of  Limitations. — In  order 

that  the  borrower  may  maintain  an  action  against  the  bank  to 
recover  the  penalty  provided  1)y  the  statute  for  taking  usurious 
interest,  such  usurious  interest  must  have  been  actually  paid,  and 
it  is  not  sufficient  that  such  interest  is  merely  charged  to  his 
account.     (Hall  v.  First  National  Bank  of  Fairfield,  30  Neb.,  99.) 


89 

Nor  is  it  sufficient  that  the  interest  was  reserved  from  the  original 
loan  by  way  of  discount.  (Smith  v.  First  National  Bank,  42 
Neb.,  687),  but  where  commercial  paper  is  transferred  to  and  dis- 
counted by  the  bank  at  a  rate  of  interest  exceeding  the  legal  rate, 
and  the  net  proceeds  after  deducting  the  interest  charged,  are  cred- 
ited to  the  transferee,  this  is  a  payment  of  the  interest  within  the 
meaning  of  the  statute.  (National  Bank  of  Rahway  v.  Carpenter, 
52  N.  J.  Law,  165.)  Each  payment  of  illegal  interest  is  regarded  as 
"  a  transaction  "  within  the  intent  of  the  statute,  and  when  such 
payment  is  actually  made,  or  accrues,  the  two  years'  limitation  com- 
mences to  run.  (First  National  Bank  of  Dorchester  v.  Smith,  39 
Neb.,  90;  Lynch  v.  Bank,  22  West  Va.,  534;  National  Bank  v. 
Carpenter,  52  N.  J.  Law,  165 ;  Bobs  v.  People's  National  Bank, 
21  Fed.  Rep.,  888.)  In  the  case  first  cited  the  sum  of  $88,  illegal 
interest,  was  paid  upon  a  loan  more  than  two  years  prior  to  the 
inception  of  the  action,  but  the  loan  upon  which  such  usurious 
interest  was  received  by  the  bank  was  not  fully  paid  until  within 
two  years  before  the  bringing  of  the  suit.  It  was  held  that  the 
limitation  began  to  run  from  the  time  the  interest  was  so  paid.  It 
is  not  sufficient  to  set  the  statute  in  operation  that  the  interest  was 
reserved  by  way  of  discount.  (Smith  v.  First  National  Bank, 
supra).  But  the  payment  of  the  loan  is  not  a  condition  precedent 
to  the  right  of  the  borrower  to  maintain  an  action  to  recover  the 
penalty  for  the  usurious  interest  paid.  The  penalty  for  all  illegal 
interest  paid  within  two  years  may  be  recovered  in  one  action, 
whether  the  amount  was  in  one  payment  or  in  several.  (Hiuter- 
mister  v.  First  National  Bank,  64  N.  Y.,  212.) 

Who  May  Bring  Action  for  Penalty. — Only  the  party  paying 
the  illegal  interest,  or  his  representatives,  can  recover  the  penalty 
therefor.  (Timberlake  v.  First  National  Bank,  43  Fed.  Rep.,  231.) 
The  action  can  not  be  brought  by  a  guarantor  or  surety.  (Lazcar 
V.  National  Union  Bank,  52  Md.,  73.)  And  one  of  the  joint  makers 
of  a  note  can  not  recover  the  penalty  where  the  illegal  interest  was 
paid  by  the  other  maker.  (Timberlake  v.  First  National  Bank, 
43  Fed.  Rep.,  231 ;  First  National  Bank  of  Concordia  ?'.  Rowley, 
52  Kans.,  394.)  But  where  a  bankrupt  has  paid  illegal  interest, 
his  assignee  may  bring  such  action.  (Wright  v.  First  National 
Bank,  8  Biss,  243;  Crocker  z'.  First  National  Bank,  Thompson's 
National  Bank  Cases,  317;  Henderson  National  Bank  v.  Alves 
91    Kentucky,    142.      But    see    Osborn   v.    First   National    Bank 


90 

of  Athens,  175  Pa.  St.,  474.)  The  right  is  conferred  upon  an 
artificial,  as  well  as  upon  a  natural,  person.  (Albion  National 
Bank  v.  Montgomery,  74  N.  W.  Rep.  1102.)  But  several  of  the 
joint  makers  of  a  note  on  which  legal  interest  is  paid  by  such 
parties  individually  can  not  unite  in  one  action  to  recover  such 
penalty.   (Teague  v.  First  National  Bank  of  Salina,  48  Pac,  603.) 

The  statute  confers  upon  the  parties  separate  rights.  That  they 
have  paid  equal  amounts  can  not  change  the  rule.  The  cause  of 
action  accrues  to  the  one  paying  the  unlawful  interest,  and  to  each 
one  making  such  paj'meuts.  There  is  no  cause  of  action  to  the 
makers  of  the  note  on  which  usurious  interest  is  paid.  The  cause 
of  action  arises  when  the  unlawful  payment  is  made,  and  to  each 
of  the  ones  making  such  payments.  (/<a^.)  [See  also  Sup- 
plement.] 

Effect  of  Usurj'  on  the  Contract  of  the  Parties. — Usury  does 
not  render  the  contract  void  (Farmers'  and  Mechanics'  National 
Bank  v.  Bearing,  91  U,  S.,  29) ;  nor  defeat  the  title  of  the  bank  to 
the  instrument  (Newell  v.  Somerset  First  National  Bank  (Ky.), 
13  Ky.  L.  Rep.,  275);  nor  does  it  avoid  an  endorsement  or  guar- 
anty of  the  paper  upon  which  the  usurious  interest  is  reserved  or 
paid.  (Lazear  v.  National  Union  Bank,  52  Md.,  78;  Oates  v. 
First  National  Bank,  100  U.  S.,  239.)  And  the  usurious  character 
of  the  transaction  between  the  bank  and  the  payee  will  not  affect 
the  liabilities  of  antecedent  parties  to  the  instrument.  (Smith  v. 
Exchange  National  Bank,  26  Ohio  St.,  141.) 

State  Laws.— The  penalties  provided  by  this  section  of  the 
National  Bank  Act  are  exclusive  ;  and  the  usury  laws  of  the  State, 
and  the  penalties  therein  provided,  have  no  application  to  the 
National  banks.  (Farmers'  and  Mechanics'  Bank  v.  Bearing,  91 
U.  S.,  29;  Stephens  v.  Monongahela  Bank,  iii  U.  S.,  197;  Bamet 
V.  Muncie  National  Bank,  98  U.  S.,  855;  Hintermister  v.  First 
National  Bank,  64  N.  Y.,  212;  Central  National  Bank  v.  Pratt, 
115  Mass.,  539;  Bavis  z'.  Randall,  115  Mass.,  547;  First  National 
Bank  v.  Garlinghouse,  22  Ohio  St.,  492;  Wiley  v.  Starbuck,  44 
Ind.,  298 ;  Florence  Railroad  and  Improvement  Companj^  v.  Chase 
National  Bank,  106  Ala.,  364;  Slaughter  z'.  First  National  Bank 
of  Montgomery,  109  Ala.,  157.)  Nor  do  the  provisions  of  the 
Judiciary  Acts  of  March  3,  1887,  and  August  13,  1888,  have  the 
effect  of  subjecting  National  banks  to  the  penalties  fixed  by  the 
States  for  exacting  unlawful  interest.     (Norfolk  National  Bank  v. 


91 

Schwenk,  41  Neb.,  381.)  Nor  is  this  the  effect  of  the  proviso  to 
Section  4  of  the  Act  of  July  12,  1882.  (lyanhum  v.  First  National 
Bank  of  Crete,  46  Neb.,  663.)  But  a  National  bank  which  has 
succeeded  to  the  business  of  a  private  bank  may  incur  the  penalties 
which  attached  to  the  former  institution  when  endeavoring  to 
enforce  the  obligation  acquired  from  it.  (Exeter  National  Bank 
V.  Orchard,  42  Neb.  579.) 

Jurisdiction  of  State  Courts. — The  defense  of  usury  may  be 
set  up  in  an  action  brought  in  a  State  court  (National  Bank  of 
Winterset  7'.  Eyre,  52  Iowa,  114),  and  State  courts  have  jurisdic- 
tion of  actions  for  the  recovery  of  the  penalty  prescribed  for  tak- 
ing illegal  interest.  (Ordway  v.  Central  National  Bank,  47  Md., 
217 ;  Beltz  V.  Columbia  National  Bank,  87  Penn.  St.,  87  ;  Hade  r. 
McVey,  31  Ohio  St.,  231.)  Such  action  maybe  brought  in  any 
local  court  in  the  county  having  jurisdiction  of  the  amount 
involved.  (Schuyler  National  Bank  v.  Bullong,  28  Neb.,  684; 
First  National  Bank  of  Tecumseh  v.  Overman,  22  Neb.,  116; 
Henderson  National  Bank  v.  Alves,  91  Ky.,  142.  But  see  Newell 
V.  National  Bank  of  Somerset,  12  Bush,  57.)  But  the  courts  of 
one  State  have  no  jurisdiction  of  an  action  against  a  National 
bank  located  in  another  State  to  recover  the  penalty.  (Missouri 
River  Telegraph  Company,  v  First  National  Bank  of  Sioux  City, 
74  111.,  217.) 

Construction  of  the  Statute. — The  statute  will  be  liberally 
construed  to  effect  the  ends  for  which  it  was  passed,  but  a  for- 
feiture under  its  provisions  will  not  be  declared  unless  the  facts 
upon  which  it  rests  are  clearly  established.  And  since  the  courts 
uniformly  incline  against  the  declaration  of  a  forfeiture,  the  party 
seeking  such  declaration  should  be  held  to  make  convincing  proof 
of  each  fact  essential  to  forfeiture.  (Wheeler  v.  Union  National 
Bank,  96  U.  S.,  785).  A  doubt  as  to  whether  there  has  been  a 
taking  of  illegal  interest  will  be  resolved  in  favor  of  the  Bank. 
(Timberlake  7'.  First  National  Bank,  43  Fed.  Rep.,  231.)  Thus 
in  case  of  a  claim  of  forfeiture  for  taking  unlawful  interest  upon 
the  discount  of  bills  of  exchange  payable  at  another  place,  it  should 
appear  affirmatively  that  the  bank  knowingly  received  or  reserved 
an  amount  in  excess  of  the  statutory  rate  of  interest  and  the  cur- 
rent exchange  for  sight  drafts ;  and  if  it  is  not  shown  what  the 
rate  of  exchange  was,  a  charge  of  one-quarter  of  one  per  cent,  in 


92 

addition  to  the  statutory  rate  of  interest  would  not  be  sufficient  to 
authorize  a  forfeiture.  (Wheeler  v.  Union  National  Bank  of  Pitts- 
burg, 96  U.  S.,  785.)  But  the  statute  is  not  a  penal  statute,  and 
does  not  require  to  be  strictly  construed.  (Albion  National  Bank 
V.  Montgomery  (Neb.),  74  N.  W-  Rep.  1102.) 

Usurious  Loans  to  Directors. — A  director  is  not,  by  reason 
of  his  position,  estopped  from  setting  up  the  defense  of  usury  in 
an  action  brought  against  him  by  the  bank.  (Bank  of  Cadiz  v. 
Slemons,  34  Ohio  St.,  142.) 

When  Rule  de  Minimis  Applies. — Where  the  illegal  interest 
exacted  amounts  to  only  five  cents,  the  rule  de  mhiimis  71011  curat 
lex  applies,  and  the  bank  will  not  be  liable  to  a  penalty  therefor. 
(Slaughter  v.  First  National  Bank  of  Montgomery,  109  Ala.,  157.) 

Waiver. — The  forfeiture  declared  by  the  National  Bank  Act 
for  taking  illegal  interest  is  not  waived  or  avoided  by  givitig  a 
separate  note  for  this  interest,  or  by  giving  a  renewal  note  in 
which  is  included  the  usurious  interest.  (Brown  v.  Marion  Na- 
tional Bank  of  lyebanon,  169  U.  S.,  416.) 

77.     Dividends  and  SurpHus  Funds. 

Section  5199. — The  directors  of  any  association  may,  semi-annually, 
declare  a  dividend  of  so  much  of  the  net  profits  of  the  association  as  they 
shall  judge  expedient;  but  each  association  shall,  before  the  declaration  of  a 
dividend,  carry  one-tenth  part  of  its  net  profits  of  the  preceding  half  year  to 
its  surplus  fund  until  the  same  shall  amount  to  twenty  per  centum  of  its 
capital  stock. 

Dividend  Periods. — This  section  is  permissive,  and  it  is  doubt- 
ful if  under  it  any  other  than  semi-annual  dividends  are  strictly 
legal.  Some  National  banks  do,  however,  declare  quarterly  divi- 
dends, and  a  few  declare  dividends  monthly. 

Surplus  Fund. — The  section  also  provides  for  the  accumula- 
tion of  a  surplus  fund,  up  to  a  certain  limit.  (For  net  profits,  see 
Section  5204,  par.  82.)  The  sections  intervening  between  Sections 
5199  and  5204  contain  provisions  which,  if  strictly  observed,  insure 
the  sound  condition  of  the  bank  and  prevent  the  payment  of  un- 
earned dividends,  or  the  payment  of  dividends  when  the  bank's 
business  is  too  extended  and  the  value  of  its  assets  in  doubt. 


93 

Declaring   Dividends. — Where  the  earnings  properly  applic- 
able to  a  dividend  are  ample  for  such  purpose,  and  the  directors, 
or  a  majority  of  them,  acting  in  bad  faith  and  without  reasonable 
cause,  refuse  to  declare  a  dividend,  the  courts  will  interpose  on 
behalf  of  those  stockholders  who  otherwise  would  be  without  rem- 
edy, and  require  the  directors  to  make  a  dividend  of  a  reasonable 
amount.      (Hiscock  v.   Lacy,   N.  Y.,  9  Misc.,  (N.  Y.)  578.)      An 
action  for  this  purpose  may  be  maintained  in  a  State  court.     (Id.) 
The  Receiver  of  an   insolvent  National  bank  may  maintain  a 
suit  in  equity  against  all  the  shareholders  of  the  bank  to  recover 
dividends  unlawfully  paid  to  them  out  of  the  capital  stock  when 
the   bank  had  earned   no  net  profit  and  was  in   fact  insolvent. 
(Hayden  v.  Thompson,  36  U.  S.  App.,  361  ;   B.  M.  53,  26  U.  S. 
Ct.  Ct.  App.  8th  Ct.,  Dec,  '95.)     In  such  a  case  the  remedies  pro- 
vided by  the  National  Bank  Act  are  not  exclusive.    And  no  special 
order  of  the  Comptroller  of  the  Currency  is  necessary  to  enable 
the  receiver  to  bring  suit.     {Id.)     [See  also  Supplement.] 

78.     Liabilities  of  any  Person,  etc.,  to  Bank. 

Section  5200. — The  total  liabilities  to  any  association,  of  any  person,  or 
of  any  company,  corporation,  or  firm  for  money  borrowed,  including,  in  the 
liabiHties  of  a  company  or  firm,  the  liabilities  of  the  several  members  thereof, 
shall  at  no  time  exceed  one-tenth  part  of  the  amount  of  the  capital  stock  of 
such  association  actually  paid  in.  But  the  discount  of  bills  of  exchange 
drawn  in  good  faith  against  actually  existing  values,  and  the  discount  of 
commercial  or  business  paper  actually  owned  by  the  person  negotiating  the 
same,  shall  not  be  considered  as  money  borrowed. 

Intent  of  Restriction. — The  general  purpose  of  this  section  is 
obvious.  It  is  to  prohibit  any  bank  from  hazarding  a  large 
amount  of  its  funds  in  loans  to  any  one  person,  and  to  require 
such  a  distribution  of  the  risks  among  a  large  number  of  persons 
that  the  failure  of  any  one  or  two  customers  will  not  so  seriously 
involve  the  bank  as  to  endanger  its  solvenc}'.  But  the  transac- 
tions of  the  banks  would  be  unduly  hampered,  if  this  rule  applied 
in  the  case  of  all  discounts,  and  so  an  exception  is  made  in  favor 
of  "bills  of  exchange  drawn  against  actually  existing  values," 
and  "  commercial  or  business  paper  actually  owned  by  the  person 
negotiating  the  same."  In  Second  National  Bank  of  Oswego  v. 
Burt  (93  N.  Y.,  233),  it  was  said  by  the  New  York  Court  of  Ap- 
peals.  "The  object  of  this  provision  of  the  currency  act  was  to 
guard  National  banks  from  the  hazard  of  loaning  money  in  im- 


94 

provident  amounts  upon  speculative  and  accommodation  paper, 
but  it  contemplated  and  permitted,  to  an  unlimited  amount,  the 
discount  of  paper  used  and  required  in  facilitating  the  transfer  of 
property  and  money  in  the  transaction  of  the  legitimate  business 
of  the  country." 

When  Applicable. — Numerous  questions  arise  under  this  sec- 
tion which  cause  bank  officers  much  perplexity.  A  question  of 
frequent  occurrence  is,  Whether  a  loan  may  be  made  to  a  person 
who  is  already  an  indorser  on  paper  discounted  by  the  bank  to  the 
amount  of  one-tenth  of  the  capital  stock  ?  It  is  quite  clear  from 
the  language  of  the  section  that  where  one  negotiates  paper  ac- 
tually owned  by  him  the  liabilities  of  none  of  the  parties  to  such 
paper  are  within  the  meaning  of  the  provision.  It  has  no  more 
application  to  the  maker  or  to  the  prior  endorser  than  it  has  to  the 
person  negotiating  the  paper.  Now,  are  the  liabilities  of  the 
sureties  included  when  the  paper  is  accommodation  paper?  It  is 
to  be  observed  that  the  liabilities  to  which  the  law  refers  are  for 
money  borrowed.  But  the  indorsee's  are  not  borrowers,  and  their 
liability,  such  as  it  is,  is  merely  contingent.  There  does  not  ap- 
pear to  be  anything  in  the  spirit  or  intent  of  the  law  which  would 
require  the  prohibition  to  be  applied  in  the  case  of  any  person 
other  than  those  to  whom  the  loans  are  made.  If  it  applied  to  the 
sureties  as  well,  then  the  bank  could  not  lawfully  take  any  paper 
however  numerous  the  parties  thereto — if  it,  at  the  time,  held 
paper  to  the  amount  of  one-tenth  of  its  capital  stock,  on  which  the 
name  of  any  one  of  those  parties  appeared,  and  notwithstanding, 
moreover,  that  on  the  paper  already  held  by  the  bank  there  might 
be  many  other  and  different  sureties  besides  this  one.  We  do  not 
believe  that  any  view  of  the  law  which  would  lead  to  such  a  con- 
clusion would  be  sustained  by  the  courts. 

But  it  is  to  be  remembered  that  the  question,  who  is  the  bor- 
rower? is  not  always  to  be  determined  from  the  positions  of  the 
parties  as  they  appear  on  the  paper.  The  borrower  rx^ay  be  the 
maker,  or  he  may  be  an  indorser.  It  is  the  person  who  negotiates 
the  paper  with  the  bank,  who  procures  the  money  upon  it,  that  is 
the  borrower,  irrespective  of  whether  he  appears  thereon  as  in- 
dorser or  guarantor  or  maker. 

Another  question  which  often  arises  is.  When  one  person  is  a 
partner  in  two  firms,  will  a  loan  of  the  maximum  amount  to  one 
of  these  firms  preclude  a  loan  to  the  other  firm  ?  We  think  not.  It 


95 

is  the  ijidividiial  indebtedness  of  the  dififerent  parties  which  is  to  be 
included  in  the  partnership  liabihty.  There  is  notliing  said  about 
including  the  liabilities  of  any  other  partnership,  nor  can  such  an 
intention  reasonably  be  inferred.  As  each  partner  is  lia))le  for  all 
the  debts  of  the  firm,  it  is  reasonable  that  his  individual  liability 
to  the  bank  should  be  included  in  the  liabilities  of  the  partner- 
ship ;  but  the  fact  that  there  is  a  common  partner  will  not  make 
one  partnership  liable  for  the  debts  of  the  other,  and  there  would, 
therefore,  be  no  reason  why  the  liabilities  of  one  firm  should  aflfect 
the  right  of  the  bank  to  make  loans  to  the  other  firm. 

Still  another  question  is.  Whether  it  is  a  violation  of  this  provi- 
sion to  make  a  loan  in  excess  of  one-tenth  of  the  amount  of  the 
capital  stock,  when  such  loan  is  secured  by  collaterals?  Such 
loans  would  seem  to  be  within  the  spirit,  as  well  as  the  letter,  of 
the  law.  There  is  the  same  danger  that  the  collaterals  may 
turn  out  badly  that  there  is  that  the  borrower  himself  may  become 
involved  or  insolvent.  The  bank's  estimate  of  their  value  must 
be,  like  its  estimate  of  the  responsibility  of  the  borrower,  merely  a 
matter  of  judgment  and  opinion. 

Penalty. — The  only  penalty  for  violation  of  this  section  is  the 
liability  which  the  bank  incurs  of  a  forfeiture  of  its  franchises,  as 
prescribed  in  Section  5239,  and  though  the  loan  is  in  excess  of  the 
amount  here  prescribed,  the  bank  can  recover  the  full  amount 
from  the  borrower.  (Gold  Mining  Company  v.  Rocky  Mountain 
National  Bank,  96  U.  S-,  640;  Corcoran  v.  Batchelder,  147  Mass., 
541 ;  O'Hare  v.  Second  National  Bank  of  Titusville,  77  Pa.  St., 
96 ;  Wyman  v.  Citizens'  National  Bank  of  Faribault,  29  Fed.  Rep., 
734  ;  Stewart  v.  The  National  Union  Bank  of  Maryland,  2  Abb. 
U.  S.,  424;  Smith  V.  First  National  Bank,  45  Neb.,  444.)  And  a 
court  of  equity  will  not  enjoin  the  bank,  at  the  instance  of  the 
borrower,  from  transferring  to  innocent  third  persons  notes  and 
securities,  on  the  ground  that  the  notes  represent  part  of  a  loan 
made  in  excess  of  10  per  cent,  of  the  capital  of  the  association. 
(Elder  V.  First  National  Bank  of  Ottawa,  12  Kans.,  238.)  Where 
a  State  bank  makes  a  loan  to  one  person  of  an  amount  in  excess 
of  one-tenth  part  of  its  capital,  and  is  afterwards  converted  into  a 
National  bank,  it  may,  after  conversion,  extend  the  time  for  pay- 
ment of  such  loan  without  violating  this  section.  (Allen  v.  The 
First  National  Bank  of  Xenia,  23  Ohio  St.,  97.) 


96 

79-    Associations  Not  to  Loan  Upon  their  Own  Stock. 

Section  5201. — No  association  shall  make  any  loan  or  discount  on  the 
security  of  the  shares  of  its  own  capital  stock,  nor  be  the  purchaser  or  holder 
of  any  such  shares,  unless  such  security  or  purchase  shall  be  necessary  to 
prevent  loss  upon  a  debt  previously  contracted  in  good  faith;  and  stock  so 
purchased  or  acquired  shall,  within  six  months  from  the  time  of  its  purchase, 
be  sold  or  disposed  of  at  public  or  private  sale ;  or,  in  default  thereof,  a 
receiver  may  be  appointed  to  close  up  the  business  of  the  association, 
according  to  section  fifty-two  hundred  and  thirty-four. 

Bank  Can  Tlot  Acquire  Lien. — It  is  held  under  this  section 
that  a  National  bank  can  not  acquire  a  lien  on  its  own  stock  in 
the  hands  of  its  stockholders,  and  that  any  provision  in  the  arti- 
cles of  association  or  by-laws,  or  in  the  certificates  of  stock  pro- 
hibiting a  transfer  until  the  liability  of  the  stockholder  to  the  bank 
is  paid,  is  wholly  void.  (Bank  v.  Lanier,  11  Wall.,  369;  Bullard 
V.  National  Bank,  18  Wall.,  589;  Conklin  v.  The  Second  National 
Bank,  45  N.  Y.,  655;  Delaware,  Lackawanna  and  Western  Rail- 
road Company  z'.  Oxford  Iron  Compau}',  38  N.J.  Eq.,  340;  Evans- 
ville  National  Bank  v.  Metropolitan  National  Bank,  2  Biss,  527.) 
But  when  a  stockholder  has  pledged  his  stock  to  the  bank,  he  can 
dispute  the  validity  of  such  pledge  only  while  the  contract  is 
executory,  and  the  securit}^  still  subsists  in  the  possession  of  the 
bank ;  if  the  stock  has  been  sold,  and  the  proceeds  applied  to  the 
payment  of  the  debt,  the  court  will  not  aid  him  to  recover  the 
value  of  his  stock.  (National  Bank  of  Xenia  v.  Stewart,  107 
U.S.,  676.)  Where  a  bank  takes  a  pledge  of  its  own  stock  to 
secure  a  deposit  made  with  another  bank,  this  is  a  lending  upon 
the  securit}--  of  its  stock  wdthin  the  meaning  o^  this  section. 
(Bank  v.  Lanier,  11  Wall.,  369.)  So  this  section  forbids  the  bank 
to  hold  the  stock  of  the  shareholder  to  secure  an  indebtedness  due 
from  him  to  it  on  account  of  collections  made  for  its  account. 
(Conklin  v.  Second  National  Bank,  45  N.  Y.,  655.)  But  this  sec- 
tion will  not  prevent  a  bank  from  holding  a  cash  dividend  as 
pledged  for  the  indebtednes  of  the  shareholder  to  the  bank. 
(Hager  v.  Union  National  Bank,  63  Me.,  509.)  Nor  does  it  forbid 
the  shares  of  the  stockholder  to  be  attached  for  his  indebtedness 
to  the  bank.     (/</.)      [See  also  Supplement.] 

Violation. — Inasmuch  as  no  penalty  is  imposed  either  upon 
the  bank  or  the  borrower  for  a  violation  of  this  section,  such  vio- 
lation may  not  be  urged  against  the  validity  of  the  transaction  by 


97 

any  one  except  the  Government,  at  least  unless  the  objection  was 
made  before  the  contract  was  executed  or  while  the  security  was 
in  the  hands  of  the  bank.  (Walden  National  Bank  v.  Birch,  130 
N.  Y.,  221.)  Therefore,  where  the  stock  is  held  by  the  cashier  in 
trust  for  the  bank,  the  invalidity  of  the  transaction  can  not  be  set 
up  as  a  defense  in  an  action  against  his  sureties  for  his  wrongful 
conversion  of  the  stock.     (/^.) 

Bank  Disposing  of. — Where  a  National  bank  purchases  shares 
of  its  own  stock,  and  divides  them  among  its  directors,  to  whom 
the  shares  are  transferred  upon  the  stock  books,  the  transaction  is 
void,  and  no  title  passes.  (Meyers  v.  Valley  National  Bank,  13 
National  Bankruptcy  Register,  34.) 

The  sale  by  an  officer  to  himself  of  the  stock  of  the  bank  owned 
by  the  bank  may  be  ratified  by  the  bank  or  its  legal  representa- 
tive ;  but  a  sale  by  himself  to  the  bank  of  its  own  stock,  where  he 
acts  in  the  double  capacity  of  seller  and  buyer,  cannot  be  ratified 
when  the  purchase  of  the  stock  by  the  bank  is  not  necessary  to 
prevent  loss  upon  a  debt  previously  contracted.  In  the  one  case 
the  sale  of  the  stock  is  enjoined  by  law,  and  its  sale  by  the  presi- 
dent may  be  ratified,  however  irregular  it  may  have  been  in  the 
first  instance ;  but  the  purchase  of  its  own  stock  by  the  bank  is 
interdicted  by  law,  and  for  this  act  there  can  be  no  authorization 
in  advance  and  no  ratification  afterwards.  (Bundy  v.  Jackson,  24 
Fed.  Rep.,  1628.) 

Where  a  purchase  of  its  own  stock  is  made  by  a  National  bank 
for  cash,  and  not  for  the  purpose  of  preventing  loss  upon  a  debt 
previously  contracted,  the  Receiver  of  the  bank  may  recover  from 
the  seller  the  amount  of  money  so  paid  to  him.  (Burrows  v. 
Niblack,  84  Fed.  Rep.,  iii.) 

This  section  does  not  forbid  a  National  bank  to  make  a  loan 
upon  the  security  of  the  .stock  of  another  National  bank.  (National 
Bank  v.  Case,  96  U.  S.,  628.) 

80.    Limit  of  Indebtedness  of  Association. 

Section  5202. — No  association  shall  at  any  time  be  indebted,  or  in  any 
way  liable,  to  an  amount  exceeding  the  amount  of  its  capital  stock  at  such 
time  actually  paid  in  and  remaining  undiminished  by  losses  or  otherwise, 
except  on  account  of  demands  of  the  nature  following: 

First.  Notes  of  circulation.  Second.  Moneys  deposited  with  or  collected 
by  the  association.  TJUrd.  Bills  of  exchange  or  drafts  drawn  against  money 
7 


98 

actually  on  deposit  to  the  credit  of  the  association,  or  due  thereto.  Fourth. 
Liabihties  to  the  stockholders  of  the  association  for  dividends  and  reserve 
profits. 

A  National  bank  may  become  indebted  upon  any  contract 
within  the  scope  of  its  powers  to  the  full  amount  of  its  capital 
stock  then  actually  paid  in,  notwithstanding  that  it  has  notes  of 
circulation,  deposits,  special  funds  subject  to  draft,  or  funds  for 
the  payment  of  declared  dividends  to  stockholders,  which  either 
alone  or  in  the  aggregate  equal  its  paid-up  capital  stock.  (Weber 
V.  Spokane  National  Bank,  64  Fed.  Rep.,  208.)  The  fact  that  an 
indebtedness  of  a  National  bank  was  incurred  in  violation  of  Rev. 
Stat.  U.  S. ,  5202,  is  no  defense  to  the  bank  or  its  receiver.  (^Id. 
reversing  the  decision  of  the  United  States  Circuit  Court  in  the 
same  case.     See  50  Fed.  Rep.,  735.) 


81.    Circulating  Notes  not  to  be  Hypothecated. 

Section  5203  — No  association  shall,  either  directly  or  indirectly,  pledge 
or  hypothecate  any  of  its  notes  of  circulation,  for  the  purpose  of  procuring 
money  to  be  paid  in  on  its  capital  stock,  or  to  be  used  in  its  banking  opera- 
tions, or  otherwise ;  nor  shall  any  association  use  its  circulating  notes,  or  any 
part  thereof,  in  any  manner  or  form,  to  create  or  increase  its  capital  stock. 

Notes  of  circulation  are  to  be  issued  by  the  bank  in  ordinary 
course  of  business.  This  section  is  intended  to  prevent  the  organ- 
ization of  more  than  one  National  bank  with  the  same  capital. 
Thus  it  was  feared  that  unscrupulous  persons  with  a  small  capital, 
say  sufficient  to  purchase  the  minimum  of  bonds  required  by  law, 
might  start  an  alleged  bank,  and  by  dishonestly  certifying  the 
capital  paid  up,  secure  circulation  which  they  could  use  in  pro- 
curing additional  payments  of  capital  or  money  in  bank.  If  the 
notes  alone  were  in  the  bank,  the  suspicions  of  the  examiner 
might  be  excited ;  but  by  changing  them  for  other  money,  and 
with  dummy  paper  to  fill  up,  a  bank  with  very  little  real  capital 
could  make  a  good  showing  on  its  books.  This  section  becomes 
especially  important,  since  the  reduction  of  the  minimum  deposit 
of  United  States  bonds  to  one-quarter  of  capital,  in  case  of  banks 
with  a  capital  of  $150,000  or  less. 

82.    Withdrawal  of  Capital ;   Dividends ;   Bad  Debts. 

Section  5204. — No  association,  or  any  member  thereof,  shall,  during  the 
time  it  shall  continue  its  banking  operations,  withdraw,  or  permit  to  be  with- 
drawn, either  in  the  form  of  dividends  or  otherwise,  any  portion  of  its  capital. 


99 

If  losses  have  at  any  time  been  sustained  by  any  such  association,  equal  to 
or  exceeding  its  undivided  profits  then  on  hand,  no  dividend  shall  be  made; 
and  no  dividend  shall  ever  be  made  by  any  association,  while  it  continues  its 
banking  operations,  to  an  amount  greater  than  its  net  profits  then  on  hand, 
deducting  therefrom  its  losses  and  bad  debts.  All  debts  due  to  any  associa- 
tions, on  which  interest  is  past  due  and  unpaid  for  a  period  of  six  months, 
unless  the  same  are  well  secured,  and  in  process  of  collection,  shall  be  con- 
sidered bad  debts  within  the  meaning  of  this  section.  But  nothing  in  this 
section  shall  prevent  the  reduction  of  the  capital  stock  of  the  association 
under  section  fifty-one  hundred  and  forty-three. 

To  Prevent  Impairment.— This  section  is  intended  to  guard 
against  any  impairment  of  the  paid-in  capital,  especially  against 
that  insidiious  form  of  impairment  so  dangerous  to  stockholders — 
its  withdrawal  in  the  shape  of  dividends. 

Undivided  Profits. — It  has  been  contended  that  the  undivided 
profits  mentioned  in  the  second  sentence  are  undivided  profits 
exclusive  of  legal  surplus, which,  if  Section  5199  is  strictly  adhered 
to,  should  at  all  times  equal  one-tenth  of  the  total  net  profits  of 
the  bank  until  such  one-tenth  exceeds  one-fifth  of  the  capital,  and 
it  is  the  rule  of  the  Comptroller's  office  that  the  legal  surplus  must 
never  be  used  to  pay  dividends,  although  it  can,  of  course,  be  used 
to  meet  losses  that  undivided  profits  other  than  legal  surplus  are 
insufficient  to  meet.  Net  profits,  both  in  this  section  and  in  Sec- 
tion 5199,  seem  to  mean  profits  other  than  legal  surplus  which 
remain  at  the  end  of  each  six  months  after  deducting  all  expenses, 
losses,  and  bad  debts. 

Bad  Debts. — The  definition  of  bad  debts  is  as  plain  as  can  be 
made  of  a  thing  so  difficult  to  define.  There  is  one  positive  sign, 
viz.,  interest  past  due  and  unpaid  for  six  months,  and  two  quali- 
fications ;  that  is,  even  if  interest  is  due  and  unpaid  for  six  months, 
they  are  still  not  bad  debts  if,  first,  they  are  well  secured,  and, 
second,  also  in  process  of  collection.  The  indefiniteness  of  this 
definition  consists  in  the  difference  of  opinion  which  may  arise  as 
to  security. 

83.    Enforcing  Payment  of  Capital  Stock. 

Section  5205. — Every  association  which  shall  have  failed  to  pay  up  its 
capital  stock,  as  required  by  law,  and  every  association  whose  capital  stock 
shall  have  become  impaired  by  losses  or  otherwise,  shall,  within  three  months 
after  receiving  notice  thereof  from  the  Comptroller  of  the  Currency,  pay  the 
deficiency  in  the  capital  stock,  by  assessment  upon  the  shareholders  pro  rata 


lOO 

for  the  amount  of  capital  stock  held  by  each ;  and  the  Treasurer  of  the 
United  States  shall  withhold  the  interest  jpon  all  bonds  held  by  him  in  trust 
for  any  such  association,  upon  notification  from  the  Comptroller  of  the  Cur- 
rency, until  otherwise  notified  by  him.  If  any  such  association  shall  fail  to 
pay  up  its  capital  stock,  and  shall  refuse  to  go  into  liquidation,  as  provided 
by  law,  for  three  months  after  receiving  notice  from  the  Comptroller,  a 
receiver  may  be  appointed  to  close  up  tWfe  business  of  the  association, 
according  to  the  provisions  of  section  fifty-two  hundred  and  thirty-four. 

Procedure  to  Restore  Capital. — Under  this  section  the 
Comptroller  takes  the  initiatory  steps  in  the  proceedings  to  restore 
an  impaired  or  unpaid  capital  stock.  He  discovers  this  condition 
of  affairs  either  through  reports  made  to  his  ofiBce  by  the  banks, 
or  from  reports  made  to  him  by  examiners.  After  the  notice  is 
issued,  the  matter  of  making  the  assessment  is  in  the  hands  of  the 
directors,  but  they  have  no  authority  to  make  the  assessment 
themselves.  For  this  purpose  it  is  necessary  to  call  a  meeting  of 
the  stockholders,  and  for  the  stockholders  to  lay  the  assessment 
themselves.  (Hulitt  v.  Bell,  85  Fed,  Rep.,  98.)  The  assessment 
is  enforceable  only  by  subjecting  the  stock  of  the  persons  refusing 
to  pay,  and  no  action  will  lie  against  a  stockholder  personally.    {Id.) 

Appointment  of  Receiver. — The  Comptroller  may,  however, 
in  his  discretion,  appoint  a  receiver  after  three  months.  This,  it 
would  seem,  makes  it  a  matter  of  judgment  for  the  directors  or 
others  most  interested  in  the  bank  either  to  make  good  the  impaired 
stock  of  the  delinquent  stockholders  and  trust  to  the  sale  to  reim- 
burse themselves,  or  to  let  the  bank  go  into  a  receiver's  hands  at 
the  end  of  three  months,  if  the  Comptroller  should  insist  on  the 
appointing  a  receiver. 

84.    Associations  not  to  Pay  out  Uncurrent  Notes. 

Sectiou  5206. — No  association  shall  at  any  time  pay  out  on  loans  or  dis- 
counts, or  in  purchasing  drafts  or  bills  of  exchange,  or  in  payment  of  deposits, 
or  in  any  other  mode  pay  or  put  in  circulation  the  notes  of  any  bank  or 
banking  association  which  are  not,  at  any  such  time,  receivable  at  par,  on 
deposit,  and  in  payment  of  debts  by  the  association  so  paying  out  or  circu- 
lating such  notes;  nor  shall  any  association  knowingly  pay  out  or  put  in  cir- 
culation any  notes  issued  by  any  bank  or  banking  association  which  at  the 
time  of  such  paying  out  or  putting  in  circulation  is  not  redeeming  its  circu- 
lating notes  in  lawful  money  of  the  United  States. 


lOI 

This  section  was  inserted  in  the  law  at  a  time  when  there  was 
still  a  large  amount  of  State  bank  notes  in  circulation,  and  it  had  ref- 
erence to  these  State  bank  notes  as  well  as  to  the  notes  of  National 
banking  associations.  The  refusal  on  the  part  of  a  National  bank 
to-day  to  redeem  its  notes,  either  at  the  Treasury  or  its  own 
counter,  would  render  it  liable  to  have  its  notes  refused  and  thrown 
out  by  every  National  bank  in  the  United  States. 

85.    Penalty   for  Falsely  Certifying  Checks. 

Section  5208. — It  shall  be  unlawful  for  any  officer,  clerk,  or  agent  of  any 
National  banking  association  to  certify  any  check  drawn  upon  the  association 
unless  the  person  or  company  drawing  the  check  has  on  deposit  with  the 
association,  at  the  time  such  check  is  certified,  an  amount  of  money  equal  to 
the  amount  specified  in  such  check.'  Any  check  so  certified  by  duly  author- 
ized officers  shall  be  a  good  and  valid  obligation  against  the  association ;  but 
the  act  of  any  officer,  clerk,  or  agent  of  any  association,  in  violation  of  this 
section,  shall  subject  such  bank  to  the  liabilities  and  proceedings  on  the  part 
of  the  Comptroller  as  provided  for  in  section  fifty-two  hundred  and  thirty- 
four. 

Section  5209,  par.  137. 

Liability  for  Certification. — The  bank  will  be  liable  upon  the 
certification,  though  it  is  made  in  violation  of  this  section. 
(Thompson  v.  St.  Nicholas  National  Bank,  146  U.  S.,  240,  S.  C, 
113  N.  Y.,  325.)  In  the  case  cited  the  following  language  of  the 
New  York  Court  of  Appeals  is  quoted  with  approval  by  the 
Supreme  Court  of  the  United  States : 

' '  It  will  be  seen  that  the  statute  affirms  the  legality  of  the  con- 
tract of  certification,  and  expressly  prescribes  the  consequences 
which  shall  follow  its  violation.  It  therefore  appears  that,  so  far 
from  making  the  contract  of  certification  void  and  illegal,  its 
validity  is  expressly  affirmed,  and  the  consequences  which  follow 
a  violation  are  specially  defined,  and  impliedly  limit  the  penalty 
incurred  to  a  forfeiture  of  the  bank's  charter  and  the  winding  up 
of  its  affairs.  There  is  a  clear  implication  from  this  provision  that 
no  other  consequences  are  intended  to  follow  a  violation  of  the 
statute.  It  would,  indeed,  defeat  the  very  policy  of  an  act  in- 
tended to  promote  the  securitj'-  and  strength  of  the  National  bank- 
ing system,  if  its  provisions  should  be  so  construed  as  to  inflict  a 
loss  upon  them,  and  a  consequent  impairment  of  their  financial 
responsibility."     (Seepage  182,  par.  193.) 


I02 

86.    List  of  Shareholders. 

Section  5210. — The  president  and  cashier  of  every  National  banking 
association  shall  cause  to  be  kept  at  all  times  a  full  and  correct  list  of  the 
names  and  residences  of  all  the  shareholders  in  the  association,  and  the 
number  of  shares  held  by  each,  in  the  office  where  its  business  is  transacted, 
Such  list  shall  be  subject  to  the  inspection  of  all  the  shareholders  and  cred- 
itors of  the  association,  and  the  officers  authorized  to  assess  taxes  under  State 
authority,  during  business  hours  of  each  day  in  which  business  may  be 
legally  transacted.  A  copy  of  such  list,  on  the  first  Monday  of  July  of  each 
year,  verified  by  the  oath  of  such  president  or  cashier,  shall  be  transmitted 
to  the  Comptroller  of  the  Currency. 

This  list  must  be  accurately  kept  at  all  times,  and  the  share- 
holders and  creditors  and  State  officers  authorized  to  assess  taxes 
must  be  afforded  free  access  to  it, during  the  business  hours  of 
each  legal  business  day — all  except  Sundays  or  legal  holidays, 
either  National  or  by  the  law  of  the  State  or  Territory  where  the 
bank  is  located.  A  copy  of  this  list,  as  it  stands  on  the  first 
Monday  of  July,  duly  executed,  must  be  sent  to  the  Comptroller. 
Blanks  for  this  list  are  sent  to  all  the  banks  from  the  Comptroller's 
office  each  year,  in  time  to  enable  the  bank  to  make  and  send  the 
list. 

87.    Reports  of  Associations  to  Comptroller. 

Section  52 ii. — Every  association  shall  make  to  the  Comptroller  of  the 
Currency  not  less  than  five  I'eports  during  each  year,  according  to  the  form 
which  may  be  prescribed  by  him,  verified  by  the  oath  or  affirmation  of  the 
president  or  cashier  of  such  association,  and  attested  by  the  signatures  of  at 
least  three  of  the  directors.  Each  such  report  shall  exhibit,  in  detail  and 
under  appropriate  heads,  the  resources  and  liabilities  of  the  associations  at 
the  close  of  business  on  any  past  day  by  him  specified ;  and  shall  be  trans- 
mitted to  the  Comptroller  within  five  days  after  the  receipt  of  a  request  or 
requisition  therefor  from  him,  and  in  the  same  form  in  which  it  is  made  to 
the  Comptroller  shall  be  published  in  a  newspaper  pubhshed  in  the  place 
where  such  association  is  estabhshed,  or  if  there  is  no  newspaper  in  the  place, 
then  in  one  published  nearest  thereto  in  the  same  county,  at  the  expense  of 
the  association  ;  and  such  proof  of  publication  shall  be  furnished  as  may  be 
required  by  the  Comptroller.  The  Comptroller  shall  also  have  power  to  call 
for  special  reports  from  any  particular  association  whenever  in  his  judgment 
the  same  are  necessary  in  order  to  a  full  and  complete  knowledge  of  its  con- 
dition. 

The  blanks  for  these  reports  are  furnished  by  the  Comptroller 
of  the  Currency.  The  attestation  of  the  directors  is  an  attestation 
of  the  correctness  of  the  report.     The  directors  are  expected  to 


I03 

know  the  condition  of  their  bank.  The  Act  of  February  26,  1881 
(par.  185),  provicfes  Ijefore  whom  the  verification  of  these  reports 
may  be  made.  The  reports,  when  made,  are  abstracted  and  filed 
in  the  Comptroller's  ofiice. 

88.    Reports  of  Dividends,  etc. 

Section  5212. — In  addition  to  the  reports  required  by  the  preceding  sec- 
tion, each  association  shall  report  to  the  Comptroller  of  the  Currency,  within 
ten  days  after  declaring  any  dividend,  the  amount  of  such  dividend,  and  the 
amount  of  net  earnings  in  excess  of  such  dividend.  Such  reports  shall  be 
attested  by  the  oath  of  the  president  or  cashier  of  the  association. 

Full  instructions  as  to  making  these  reports  will  be  found  on 
page  253. 

89.    Penalty  for  Failure  to  Make  Reports. 

Section  5213, — Every  association  which  fails  to  make  and  transmit  any 
report  required  under  either  of  the  two  preceding  sections  shall  be  subject  to 
a  penalty  of  one  hundred  dollars  for  each  day  after  the  periods,  respectively, 
therein  mentioned,  that  it  delays  to  make  and  transmit  its  report.  Whenever 
any  association  delays  or  refuses  to  pay  the  penalty  herein  imposed,  after  it 
has  been  assessed  by  the  Comptroller  of  the  Currency,  the  amount  thereof 
may  be  retained  by  the  Treasurer  of  the  United  States,  upon  the  order  of  the 
Comptroller  of  the  Currency,  out  of  the  interest,  as  it  may  become  due  to  the 
association,  on  the  bonds  deposited  with  him  to  secure  circulation.  All  sums 
of  money  collected  for  penalties  under  this  section  shall  be  paid  into  the 
Treasury  of  the  United  States. 

These  penalties  for  failure  or  delay  in  making  reports  are  often 
enforced. 

90.    Duty  on  Circulation. 

Section  5214. — In  lieu  of  all  existing  taxes,  every  association  shall  pay  to 
the  Treasurer  of  the  United  States,  in  the  months  of  January  and  July,  a  duty 
of  one-half  of  one  per  centum  each  half  year  upon  the  average  amount  of  its 
notes  in  circulation,  and  a  duty  of  one -quarter  of  one  per  centum  each  half 
year  upon  the  average  amount  of  its  deposits,  and  a  duty  of  one-quarter  of 
one  per  centum  each  half  year  on  the  average  amount  of  its  capital  stock, 
beyond  the  amount  invested  in  United  States  bonds. 

This  section  is  obsolete,  excepting  as  to  tax  on  circulation,  and 
this  has  been  reduced  one-half  by  Act  of  March  14,  1900,  when 
the  bonds  securing  the  circulation  are  Consols  of  1930.  (See 
page  316.)  The  tax  is  upon  the  average  amount  of  notes 
in  circulation — not  those  held  by  the  bank  or  in  transit 
between  it  and  the  Comptroller's  oflSce.  The  average  may 
be  calculated  by  adding  together  the  amount  of  circulation 
outstanding  each  business  day  of  the  semi-annual  period, 
and  then  dividing  by  the  number  of  business  days. 


104 

91.     Semi^Annual  Return  of  Circulation. 

Section  5215. — In  order  to  enable  the  Treasurer  tdtessess  the  duties  im- 
posed by  the  preceding  section,  each  association  shall,  within  ten  days  from 
the  first  days  of  January  and  July  of  each  year,  make  a  return,  under  the  oath 
of  its  president  or  cashier,  to  the  Treasurer  of  the  United  States,  in  such  form 
as  the  Treasurer  may  prescribe,  of  the  average  amount  of  its  notes  in  circu- 
lation, and  of  the  average  amount  of  its  deposits,  and  of  the  average  amount 
of  its  capital  stock,  beyond  the  amount  invested  in  United  States  bonds,  for 
the  six  months  next  preceding  the  most  recent  first  day  of  January  or  July, 
Every  association  which  fails  so  to  make  such  return  shall  be  liable  to  a  pen- 
alty of  two  hundred  dollars,  to  be  collected  either  out  of  the  interest  as  it  may 
become  due  such  association  on  the  bonds  deposited  with  the  Treasurer,  or, 
at  his  option,  in  the  manner  in  which  penalties  are  to  be  collected  of  other 
corporations  under  the  laws  of  the  United  States. 

The  blanks  for  these  returns  are  sent  to  the  banks  by  the  Treas- 
urer, and  contain  full  instructions  as  to  the  proper  manner  in 
which  to  make  these  reports. 

92.    Assessment  if  Return  is  Not  Made. 

Section  5216. — Whenever  any  association  fails  to  make  the  half-yearly 
return  required  by  the  preceding  section,  the  duties  to  be  paid  by  such  asso- 
ciation shall  be  assessed  upon  the  amount  of  notes  delivered  to  such  associa- 
tion by  the  Comptroller  of  the  Currency,  and  upon  the  highest  amount  of  its 
deposits  and  capital  stock,  to  be  ascertained  in  such  manner  as  the  Treasurer 
may  deem  best. 

It  is  usually  the  best  plan  for  the  bank  to  make  up  its  own  aver- 
age, as  that  made  by  the  Treasurer  would  necessarily  include  notes 
that  the  bank  might  hold. 

93.  How  Tax  May  be  Collected. 

Section  5217. — Whenever  an  association  fails  to  pay  the  duties  imposed 
by  the  three  preceding  sections,  the  sums  due  may  be  collected  in  the  man- 
ner provided  for  the  collection  of  United  States  taxes  from  other  corpora- 
tions ;  or  the  Treasurer  may  reserve  the  amount  out  of  the  interest,  as  it  may 
become  due,  on  the  bonds  deposited  with  him  by  such  defaulting  association. 

94.  Refunding  Excess  of  Duties. 

Section  5218. — In  all  cases  where  an  association  has  paid  or  may  pay  in 
excess  of  what  may  be  or  has  been  found  due  from  it,  on  account  of  the  duty 
required  to  be  paid  to  the  Treasurer  of  the  United  States,  the  association  may 
state  an  account  therefor,  which,  on  being  certified  by  the  Treasurer  of  the 
United  States,  and  found  correct  by  the  First  Comptroller  of  the  Treasury, 
shall  be  refunded  in  the  ordinary  manner  by  warrant  on  the  Treasury. 


105 

There  is,  however,  no  special  appropriation  for  this  purpose. 
The  claim  for  recovery  of  excessive  taxes  paid,  if  presented  and 
found  correct  in  the  manner  indicated  in  this  section,  is  taken  into 
account  by  the  Secretary  of  the  Treasury  in  making  his  estimates 
to  Congress.  The  amount  necessary  to  pay  the  claim  is  usually 
appropriated  by  Congress,  and  the  claimant  will  then  receive  its 
money,  by  warrant,  etc.,  as  stated  in  the  section, 

95.    Provisions   Relative  to   State  Taxation. 

Section  5219. — Nothing  herein  shall  prevent  all  the  shares  in  any  associ- 
ation from  being  included  in  the  valuation  of  the  personal  property  of  the 
owner  or  holder  of  such  shares,  in  assessing  taxes  imposed  by  authority  of 
the  State  within  which  the  association  is  located  ;  but  the  Legislature  of  each 
State  may  determine  and  direct  the  manner  and  place  of  taxing  all  the  shares 
of  National  banking  associations  located  within  the  State,  subject  only  to  the 
two  restrictions,  that  the  taxation  shall  not  be  at  a  greater  rate  than  is 
assessed  upon  other  moneyed  capital  in  the  hands  of  individual  citizens  of 
such  State,  and  that  the  shares  of  any  National  banking  association  owned 
by  non-residents  of  any  State  shall  be  taxed  in  the  city  or  town  where  the 
bank  is  located,  and  not  elsewhere.  Nothing  herein  shall  be  construed  to 
exempt  the  real  property  of  associations  from  either  State,  county  or  munici- 
pal taxes,  to  the  same  extent,  according  to  its  value,  as  other  real  property  is 
taxed. 

Taxes  Authorized  by  this  Section  Exclusive. — The  taxes 
which  the  States  are  authorized  by  this  section  to  impose  are  ex- 
clusive, and  the  National  banks  are  not  liable  to  any  other  tax 
imposed  under  State  authority.  (National  State  Bank  of  Oska- 
loosa  V.  Young,  25  Iowa,  311.)  And  the  provision  in  Section  5214, 
Rev.  Stat.  U.  S.,  "  in  lieu  of  all  existing  taxes,"  includes  all  State, 
county  and  municipal  taxes.     (/</.) 

Taxes  Upon  the  Shares— Difference  Between  Shares  and 
Capital  Stock. — The  taxes  which  the  States  are  authorized  to 
impose  are  taxes  upon  the  shares  of  stock  in  the  hands  of  the 
stockholders.  Such  taxes  are  not  the  same  as  taxes  upon  the 
capital  of  the  bank.  (Van  Allen  v.  The  Assessors,  3  Wall.,  573.) 
"  The  interest  of  the  shareholder  entitles  him  to  participate  in  the 
net  profits  earned  by  the  bank  in  the  employment  of  its  capital, 
during  the  existence  of  its  charter,  in  proportion  to  the  number  of 
his  shares,  and,  upon  its  dissolution  or  termination,  to  his  propor- 
tion of  the  property  that  maj^  remain  of  the  corporation  after  the 
payment  of  its  debts.     This  is  a  distinct  independent  interest  or 


io6 

property,  held  by  the  shareholder  like  any  other  property  that 
may  belong  to  him.  Now,  it  is  this  interest  which  the  act  of  Con- 
gress has  left  subject  to  taxation  by  the  States,  under  the  limita- 
tions prescribed."  {Id.)  Where  new  shares  are  issued  they  can 
not  be  taxed  until  the  increase  is  approved  by  the  Comptroller  of 
the  Currency.  (Charleston  People's  National  Bank,  5  S.  C, 
103.)  The  shares  are  taxable  without  regard  to  their  ownership, 
and  where  a  National  bank  owns  stock  in  another  National  bank, 
it  may  be  taxed  thereon.  (Bank  of  Redemption  v.  Boston,  126 
U.  S.,  60.) 

To  \A^hom  Assessed. — As  the  tax  can  be  only  on  the  shares 
they  must  be  assessed  to  the  shareholders  in  their  names,  and  not 
in  the  name  of  the  bank.  (Miller  z'.  First  National  Bank  of  Cincin- 
nati, 46  Ohio  St.,  424.)  And  an  assessment  of  the  capital  stock 
as  the  personal  property  of  the  bank  without  mention  of  the  share- 
holders is  void.  (Farmers'  and  Traders'  National  Bank  v.  Hoff- 
man, 93  Iowa,  119.)  And  the  shares  cannot  be  assessed  i?i  solido 
against  the  bank.  (First  National  Bank  of  Leoti  v.  Fisher,  45 
Kan.,  726;  National  Bank  of  Virginia  z'.  City  of  Richmond,  42 
Fed.  Rep. ,  877  ;  Citizens'  Bank  of  lyouisiana  v.  Board  of  Assessors, 
52  Fed.  Rep.,  73;  Whitney  National  Banker.  Parker,  41  Fed.  Rep., 
402.  But  see  First  National  Bank  of  Aberdeen  v.  Chehalis  County, 
6  Wash.,  64.)  But  as  we  shall  see  hereafter,  the  bank  may  be 
required  to  pay  the  tax  for  its  stockholders. 

Meaning  of  the  Term  "  Moneyed  Capital." — The  provision 
that  the  taxation  shall  not  be  at  a  greater  rate  than  is  assessed 
upon  other  moneyed  capital  in  the  hands  of  individual  citizens  is 
to  be  construed  in  the  light  of  the  purpose  and  object  of  Congress. 
The  main  purpose  was  to  render  impossible  for  the  States,  in 
levying  taxes,  to  create  and  foster  an  unequal  and  unfriendly  com- 
petition, by  favoring  institutions  or  individuals  carrying  on  a  sim- 
ilar business,  and  operations  and  investments  of  a  like  character. 
The  meaning  of  the  term  "moneyed  capital"  must,  therefore,  be 
limited  to  such  capital  as  comes  into  competition  with  the  Na- 
tional banks.  It  "includes  shares  of  stock  or  other  interests 
owned  by  individuals  in  all  enterprises  in  which  the  capital  em- 
ployed in  carrying  on  its  business  is  money,  where  the  object  of 
the  business  is  the  making  of  profit  by  the  use  of  money.  The 
money  capital  thus  employed  is  invested  for  that  purpose  in  se- 


107 

curities  by  way  of  loan,  discount,  or  otherwise,  which  are  from 
time  to  lime,  according  to  the  rules  of  the  business,  reduced  again 
to  money  and  re-invested.  In  this  way  the  moneyed  capital  in 
the  hands  of  individuals  is  distinguished  from  what  is  known 
generally  as  personal  property.  *  *  *  But  '  moneyed  capital ' 
does  not  mean  all  capital  the  value  of  which  is  measured  in  terms 
of  money.  In  this  sense,  all  kinds  of  real  and  personal  property 
would  be  embraced  by  it,  for  they  all  have  an  estimated  value  as 
the  subjects  of  sale.  Neither  does  it  necessarily  include  all  forms 
of  investment  in  which  the  interest  of  the  owner  is  expressed  in 
money.  Shares  of  stock  in  railroad  companies,  mining  com- 
panies, manufacturing  companies,  and  other  corporations,  are  rep- 
resented by  certificates  showing  that  the  owner  is  entitled  to 
interest,  expressed  in  money  value,  in  the  entire  capital  and  pro- 
perty of  the  corporation,  but  the  property  of  the  corporation  which 
constitutes  its  invested  capital  may  consist  mainly  of  real  and  per- 
sonal property,  which,  in  the  hands  of  individuals,  no  one  would 
think  of  calling  moneyed  capital,  and  its  business  may  not  consist 
in  any  kind  of  dealing  in  mone}',  or  commercial  representative  of 
money.  So  far  as  the  policy  of  the  Government  in  reference  to 
National  banks  is  concerned,  it  is  indifferent  how  the  State  may 
choose  to  tax  such  corporations  as  those  just  mentioned,  or  the 
interest  of  individuals  in  them,  or  whether  they  should  be  taxed 
at  all.  Whether  property  interests  in  railroads,  in  manufacturing 
enterprises,  in  mining  investments,  and  others  of  that  description 
are  taxed  or  exempt  from  taxation  in  the  contemplation  of  the 
law,  would  have  no  effect  upon  the  success  of  National  banks. 
There  is  no  reason,  therefore,  to  suppose  that  Congress  intended, 
in  respect  to  these  matters,  to  interfere  with  the  power  and  policy 
of  the  States.  The  business  of  banking,  as  defined  by  law  and 
custom,  consists  in  the  issue  of  notes  payable  on  demand,  intended 
to  circulate  as  money,  where  the  banks  are  banks  of  issue,  in  re- 
ceiving deposits  payable  on  demand,  in  discounting  commercial 
paper,  making  loans  of  money  on  collateral  security,  buying  and 
selling  bills  of  exchange,  negotiating  loans,  and  dealing  in  nego- 
tiable securities  issued  by  the  Government,  State,  National,  and 
municipal,  and  other  corporations.  These  are  the  operations  in 
which  the  capital  invested  in  National  banks  is  employed,  and  it 
is  the  nature  of  that  employment  which  constitutes  it  in  the  eye 
of  this  statute  'moneyed  capital.'  Corporations  and  individuals 
carrying  on  these  operations  do  come  into  competition  with  the 


I09 

see  National  State  Bank  v.  Young,  25  Iowa,  311 ;  County  Commis- 
sioners V.  Farmers'  and  Mechanics'  National  Bank,  48  Md.,  117).  If 
the  shares  are  assessed  at  their  actual  cash  value  without  any  deduc- 
tion for  real  estate,  the  latter  should  not  be  taxed  separately. 
(Commissioners  of  Rice  County  v.  Citizens'  National  Bank  of 
Faribault,  23  Minn.,  280.)  As  the  tax  is  upon  the  shares  and  not 
upon  the  capital  stock,  it  is  not  necessary  that  any  deduction 
should  be  made  for  that  portion  of  the  capital  which  is  invested 
in  United  States  bonds  or  other  non-taxable  securities,  (Van 
Allen  V.  The  Assessors,  3  Wall.,  573.) 

Exemptions. — In  Adams  v.  Nashville  (95  U-  S.,  19)  it  was 
said  by  the  Supreme  Court,  "the  act  of  Congress  was  not  intended 
to  curtail  the  State  power  on  the  subject  of  taxation.  It  simply 
required  that  capital  invested  in  National  banks  should  not  be 
taxed  at  a  greater  rate  than  like  property  similarly  invested.  It 
was  not  intended  to  cut  off  the  power  to  exempt  particular  kinds 
of  property  if  the  legislature  chose  to  do  so."  Accordingly,  it  has 
been  held  by  that  court  that  a  partial  exemption  of  other  moneyed 
capital  will  not  deprive  the  State  of  the  power  to  levy  a  tax  on 
National  bank  stock.  (Hepburn  v.  School  Directors,  23  Wall., 
480 ;  see  also  Washington  National  Bank  v.  King  County,  9  Wash., 
607.)  Thus  bonds  issued  by  a  State,  or  under  its  authority,  by 
its  public  municipal  bodies,  although  thej^  undoubtedly  represent 
moneyed  capital,  may  be  exempted  without  this  effect,  since  they 
are  not  ordinarily  the  subject  of  taxation.  (Mercantile  Bank  v. 
New  York,  121  U.  S.,  138.)  So  the  State  may  exempt  savings- 
bank  deposits  {Id.),  or  the  credits  of  individuals  such  as  accounts, 
promissory  notes,  and  mortgages.  (First  National  Bank  v.  Che- 
halis  Co.,  6  Wash.,  64.)  But  all  exemptions  must  be  founded 
upon  just  reason,  and  not  operate  as  an  unfriendlj^  discrimination 
against  investments  in  National  bank  shares.  {Id.)  Where  the 
exemptions  in  favor  of  other  moneyed  capital  are  so  palpable  as 
to  show  that  there  is  a  serious  discrimination  against  capital  in- 
vested in  the  shares  of  National  banks,  the  tax  upon  such  shares 
will  be  declared  invalid.  (Boyer?'.  Boyer,  113  U.  S.,  690.)  And 
where  a  tax  is  imposed  on  the  market  value  of  the  shares  of  a 
National  bank  without  allowance  of  any  deduction  for  the  non- 
taxable securities  and  specifically  taxed  property  held  by  the  bank, 
and  where  it  is  also  so  assessed  that  the  owners  of  shares  thus 
taxed  are  deprived  of  the  privilege  allowed  other  moneyed  capital- 


io8 

business  of  National  banks,  and  capital  thus  employed  is  what  is 
intended  to  be  described  by  the  act  of  Congress."  'Mercantile 
National  Bank  v.  New  York,  121  U.  S.,  138;  Talbott  v.  Silver 
Bow  County,  139  U.  S.,  438;  Palmer  v.  McMahon,  133  U.  S.,  660; 
Bank  of  Redemption  v.  Boston,  125  U.  S.,  60.)  [See  also  Sup- 
plement.] 

Accordingly,  it  has  been  held  by  the  United  States  Supreme 
Court  that  the  exemption  from  taxation  of  shares  of  stock  in 
corporations,  the  business  of  which  does  not  come  into  competi- 
tion with  that  of  the  National  banks,  is  not  a  discrimination 
against  National  banks  within  the  intendment  of  the  law ;  and 
that  the  fact  that  a  less  rate  of  tax,  or  no  tax  at  all,  is  imposed 
upon  such  corporations  as  railroad  companies,  manufacturing 
companies,  mining  companies,  and  insurance  companies  does  not 
invalidate  the  tax  upon  National-bank  stock.  (Mercantile  Na- 
tional Bank  v.  New  York,  121  U.  S-,  138.) 

And  a  tax  upon  National-bank  stock  is  not  void,  even  though 
the  State  statute  exempts  from  taxation  the  stock  of  many  corpora- 
tions the  entire  capital  of  which  is  invested  in  assessable  property 
in  the  State,  and  though  some  of  the  property  of  such  corpora- 
tions, not  moneyed  capital,  is  not  assessed  at  all,  or  at  a  lower  rate 
than  bank  stock.     (Talbott  v.  Silver  Bow  County,  139  U.  S.,  441.) 

What  is  Meant  by  "Greater  Rate." — Any  system  of  assess- 
ment of  taxes  which  exacts  from  the  owner  of  the  shares  of  a 
National  bank  a  larger  sum  in  proportion  to  the  actual  value  of 
those  shares  than  it  does  from  other  moneyed  capital,  valued  in 
like  manner,  taxes  the  shares  at  a  greater  rate,  notwithstanding 
that  the  percentage  of  tax  on  the  valuation  is  the  same  as  that 
applied  to  other  moneyed  capital.  (Pelton  v.  Commercial  Na- 
tional Bank,  loi  U.  S. ,  143;  see  also  Whitbeck  v.  Mercantile 
Bank,  127  U.  S.,  193.) 

Valuation  of  Shares. — In  estimating  the  value  of  the  shares, 
all  the  property  and  assets  of  the  bank  may  be  taken  into  con- 
sideration unless  such  property  is  taxed  separately.  (St.  Louis 
National  Bank  v.  Papin,  3  Cent.  L.  J.,  669;  i  Nat.  Bank  Cas., 
326;  Stafford  National  Bank  v.  Davis,  59  N.  H.,  38.)  And  it  has 
been  held  that  where  shares  are  taxed  at  their  par  value,  the  surplus 
fund  maybe  taxed  separately  if  it  is  not  invested  in  Federal  securi- 
ties. (First  National  Bank  v.  Peterborough,  56  N.  H.  38  ;  North 
Ward  National  Bank  v..  City  of  Newark,  39  N.  J.  Law,  380.     But 


no 

ists  of  deducting  from  the  amount  of  securities  held  by  them  the 
amount  of  bonds,  securities,  liquidated  claims  and  demands  due 
from  them  respectively  to  others,  such  a  tax  violates  the  provisions 
of  the  Statutes  of  the  United  States,  and  is  void.  (The  First 
National  Bank  of  Richmond  v.  The  City  of  Richmond,  39  Fed. 
Rep.  389.)  If  in  the  practical  execution  of  a  State  tax  law,  it  is 
found  impracticable  to  list  more  tlian  a  small  portion  of  the 
property  subject  to  taxation,  other  than  National  bank  shares,  the 
National  banks  may  demand  such  forms  of  relief  as  will  protect 
the  shareholders  from  paying  a  greater  rate  of  taxation  than  is 
imposed  on  individual  citizens,  (First  National  Bank  v.  Lind- 
say, 45  Fed.  Rep.,  619.) 

Deductions. — Stockholders  of  the  National  Banks  must  be  al- 
lowed the  same  deductions  from  the  assessment  against  them  upon 
their  shares  of  stock  that  are  allowed  to  the  other  taxpayers  in  the 
State  on  their  moneyed  capital.  (People  v.  Weaver,  100  TT.  S., 
539,  reversing  S.  C,  67  N.  Y.,  516,  and  overruling  People  v. 
Dolan,  36  N.  Y.,  59.)  And  if  the  owners  of  other  moneyea  capital 
are  permitted  to  deduct  from  the  assessed  value  thereof  the  amount 
of  debts  which  they  owe,  the  same  privilege  must  be  allowed  to 
the  holders  of  National  bank  stock.  (People  v.  Weaver,  100  U. 
S.,  539;  Britton  v.  Kvansville  National  Bank,  105  U.  S.,  322; 
Supervisors  v.  Stanley,  105  U.  S.,  305  ;  First  National  Bank  of 
lycoti  V.  Fisher,  45  Kans.,  726;  Mercantile  National  Bank  v. 
Shields,  59  Fed.  Rep.,  952.)  And  the  mode  of  assessment  must 
be  such  that  these  deductions  can  be  made  ;  and,  therefore,  an  as- 
sessment of  all  the  shares  against  the  bank  in  solido  which  would 
preclude  such  deductions,  would  be  void.  (First  National  Bank  v. 
City  of  Richmond,  39  Fed.  Rep.,  309.)  But  it  is  immaterial  that 
such  deductions  are  allowed  to  holders  of  stock  in  railroad,  insur- 
ance and  manufacturing  corporations,  since  such  stock  is  not 
regarded  as  "  moneyed  capital."  (Mercantile  National  Bank  v. 
Shields,  59  Fed.  Rep.,  952.)  Non-resident  stockholders  are  en- 
titled to  the  same  deductions  as  resident  stockholders.  (/</.  /  Town 
of  Farraington  v.  Downing  (New  Hampshire),  30  Atl.  Rep.,  345.) 
Where  the  laws  of  a  State  require  National  Bank  shares  to  be 
assessed  for  taxation  at  their  real  value,  it  is  not  a  discrimination 
against  these  banks  that  private  banks  are  permitted  to  deduct 
the  amount  of  their  deposits  from  their  taxable  assets,  and  this 
privilege  is  withheld  from  National  banks,  for  the  general  deposits 


Ill 

are  debts  against  the  bank,  and  the  real  value  of  the  shares  de- 
pends upon  the  value  of  the  bank's  franchise,  capital  and  property 
of  all  kinds,  less  the  amount  of  its  debts.  (Engelke  et  al.  v. 
Schlender,  75  Tex.,  559.}  Under  the  statutes  of  Virginia  a  stock- 
holder in  a  National  bank  is  not  entitled  to  have  his  indebtedness 
deducted  from  the  value  of  his  stock  before  it  is  assessed  for  taxa- 
tion. (Burrows  v.  Smith,  Treasurer,  29  S.  E.  Rep.,  674.)  [See 
also  Supplement.] 

Non-taxable  Property. — The  intention  of  Congress  was  that 
the  rate  of  taxation  should  be  tlie  same  as,  or  not  greater  than, 
the  tax  upon  moneyed  capital,  which  is  subject  and  liable  to  taxa- 
tion, and  which  the  State  has  the  capacity  to  tax.  (People  v. 
Commissioners,  4  Wall.,  241  ;  Lionberger  v.  Rouse,  9  Wall.,  468.) 
It  is,  therefore,  no  ground  of  objection  to  the  validity  of  a  tax  on 
National  bank  stock  that,  while  deductions  are  made  from  the 
personal  estates  of  individuals  and  the  capital  of  State  corporations 
for  the  Government  bonds  owned  by  them,  no  such  deduction  is 
made  on  account  of  the  capital  of  National  banks  invested  in  such 
bonds,  or  that  private  bankers  are  allowed  to  deduct  legal  tender 
notes,  and  no  deduction  is  allowed  for  such  notes  held  by  National 
banks.  (Adair  v.  Robinson,  6  Tex.  Cir.  App.,  275;  People  v. 
Commissioners,  supra.^  And  where  a  State  had  previously  con- 
tracted with  the  banks,  which  it  had  chartered,  that  they  should 
not  be  taxed  above  a  certain  rate,  it  was  held  by  the  Supreme 
Court  that  a  tax  on  National  bank  stock  at  a  greater  rate  is  not 
invalid,  if  this  rate  is  not  greater  than  that  assessed  upon  all 
moneyed  capital  within  the  State,  except  that  of  the  State  banks, 
(lyionberger  v.  Rouse,  9  Wall.,  468.) 

Mode  in  which  State  Banks  Must  Be  Taxed. — Where  the 
State  banks  are  taxed  upon  the  capital,  no  tax  can  be  imposed 
upon  the  shares  of  National  banks,  for  as  the  capital  of  the  State 
banks  ma}^  consist  of  bonds  of  the  United  States  which  are  exempt 
from  taxation,  a  tax  on  capital  is  not  equivalent  to  a  tax  on  shares. 
(Van  Allen  v.  The  Assessors,  3  Wall.,  573  ;  Bradley  v.  The  People, 
4  Wall.,  459.)  But  though  the  tax  upon  the  State  banks  is  not 
eo  nomine  a  tax  on  shares,  yet  if  it  is  equivalent  to  such  a  tax,  the 
shares  in  the  National  banks  located  in  that  State  may  be  taxed. 
(Frazer  7>.  Seibern,  16  Ohio  St.,  614;  Van  Slyke  v.  State,  26  Wis., 
655;  BoynoU  v.  State,  25  Wis.,  112.)  But  Congress  meant  no 
more  than  to  require  of  the  States,  as  a  condition  to  the  exercise 


112 

of  the  power  to  tax  the  shares  iu  National  banks,  that  they  should, 
as  far  as  they  had  the  capacity,  tax  in  like  manner  the  shares  of 
banks  of  their  own  creation.  (L,ionberger  v.  Rouse,  9  Wall.,  46S.) 
Therefore,  where  a  State  has  previously  contracted  with  the  banks 
which  it  has  chartered  that  they  should  not  be  taxed  above  a  cer- 
tain rate,  a  tax  upon  National  bank  shares  at  a  greater  rate  is  not 
invalid,  if  this  rate  is  not  greater  than  that  assessed  upon  all  the 
moneyed  capital  within  the  State,  except  that  of  the  State  banks. 
{Id.;  City  of  Richmond  v.  Scott,  48  Ind.,  568.) 

State  Constitution. — The  taxation  upon  National  bank  shares 
by  States  must  be  characterized  by  such  equality  and  uniformity 
as  is  required  by  the  State  constitution  for  the  protection  of  indi- 
vidual citizens  having  moneyed  capital.  (First  National  Bank  v. 
I^indsay,  45  Fed.  Rep.,  619.)  National  and  State  banks  in  Ken- 
tucky are  subject  to  county  and  municipal  taxation.  (Deposit 
Bank  of  Owensboro  v.  Daviess  County,  39  S.  W.  Rep.,  1030.)  And 
the  acceptance  by  the  banks  of  the  act  known  as  the  ' '  Hewitt 
Law"  does  not  preclude  the  State  from  subjecting  them  to  other 
modes  of  taxation.     (/</.) 

Taxation  by  Territories. — Although  the  word  "territory  "  is 
not  mentioned  specifically  in  the  statute,  the  Territories  have  the 
same  power  of  taxation  of  National  banks  that  the  States  have. 
(Talbott  V.  Silver  Bow  Co.,  139  U.  S.,  441.) 

Insolvent  National  Bank. — The  personal  property  of  an  in- 
solvent National  bank  in  the  hands  of  a  receiver  appointed  by  the 
Comptroller  of  the  Currency  is  exempt  from  taxation  under  State 
laws.  (Rosenblatt  v.  Johnston,  104  U.  S.,  462;  see  Woodward  v. 
Ellsworth,  4  Colo.,  580.)  And  where  a  National  bank  has  become 
insolvent  and  the  property  representing  the  capital  stock  has  been 
swept  away,  no  tax  on  the  shares  can  be  collected  from  the  receiver 
imder  a  statute  requiring  a  tax  to  be  paid  by  the  bank.  (City  of 
Boston  V.  Beal,  55  Fed.  Rep.,  26;  S.  C,  51  Fed.  Rep.,  306.) 

State  Bank  Converted  into  National  Bank. — While  a  State 
bank  is  changing  to  a  National  bank,  and  before  the  requirements 
of  the  State  statute  are  fully  complied  with,  it  is  subject  to  State 
taxation.  (Commonwealth  v.  Manufacturers'  and  Mechanics'  Bank 
of  Philadelphia,  2  Pearson's  Decisions,  386 ;  2  Nat.  Bank  Cas.,  459.) 


113 

Branch  Bank. — A  National  bank  located  in  New  Jersey,  for  the 
convenience  of  persons  in  Philadelphia,  kept  a  clerk  in  that  city 
who  received  deposits:  Hdd,  That  the  bank  did  not  become 
located  in  Philadelphia  so  as  to  be  liable  to  taxation,  (National 
State  Bank  of  Camden  v.  Pierce,  iS  Albany  Law  Journal,  i6;  2 
Nat.  Bank  Cas.,  177.) 

License  Tax — Tax  on  Circulating  Notes. — Neither  the  State 
nor  its  municipalities  can  impose  a  license  or  privilege  tax  upon 
the  National  banks.  (Mayor  v.  First  National  Bank,  59  Ga.,  648 ; 
City  of  Carthage  v.  First  National  Bank,  71  Mo.,  508;  National 
Bank  of  Chattanooga  v.  Mayor,  8  Heiskell  (Tenn.),  814.)  As  to 
whether  the  States  could  tax  the  circulating  notes  of  the  National 
banks  the  authorities  are  in  conflict.  In  North  Carolina  (Lilly  v. 
Board  of  Commissioners,  69  N.  C,  300  ;  Ruffin  v.  Board  of  Com- 
missioners, 69  N.  C,  498)  and  Indiana  (Board  of  Commissioners 
V.  Blston,  32  Ind.,  37)  it  was  held  that  such  a  tax  was  invalid, 
while  in  Mississippi  the  contrary  was  held.  (Home  v.  Greene,  52 
Miss.,  452.)  But  now  by  the  act  of  Congress  approved  August 
13,  1894,  such  tax  is  expressly  authorized. 

Collection  of  Taxes. — While  the  tax  is  upon  the  shares  it  is 
usually  collected  from  the  banks,  they  paying  for  their  share- 
holders. The  right  of  the  States  to  collect  the  tax  in  this  manner 
has  been  sustained  by  the  United  States  Supreme  Court.  (National 
Bank  v.  Commonwealth,  9  Wall.,  353.)  But  the  bank  is  not 
absolutely  liable  for  the  tax  upon  the  shares ;  to  render  it  liable  it 
must  be  shown  to  have,  or  have  had,  dividends  or  other  propertj^ 
belonging  to  the  shareholders.  (Farmers'  and  Traders'  National 
Bank  v.  Hoffman,  93  Iowa,  191  ;  see,  also,  Hershire  v.  First  Na- 
tional Bank,  35  Iowa,  272.  But  see  First  National  Bank  v.  Doug- 
las Count)^  3  Dill.,  330.)  A  State  may  require  the  ofl&cers  of 
National  banks  located  within  its  territory  to  transmit  lists  of  its 
stockholders  to  the  taxing  officers  of  the  various  towns  and  villages 
in  which  the  stockholders  who  are  residents  reside.  (Waite  v. 
Dowly,  94  U.  S.,  527.  But  see  First  National  Bank  of  Youngs- 
town  V.  Hughes,  2  Nat.  Bank  Cas.,  176.)  And  State  courts  have 
jurisdiction  to  compel  the  officers  of  National  banks  by  mandamus 
to  exhibit  to  the  county  assessors  the  list  of  the  shareholders  in 
their  banks ;  and  to  this  end  it  is  not  necessary  the  statute  should 
he  supplemented  by  State  legislation.  (Paul  v.  McGrau,  3  Wash. 
8 


114 

St.,  296.)  Where  a  National  bank  has  become  insolvent  and  the 
property  representing  the  capital  stock  has  been  swept  away,  no 
tax  on  the  shares  can  be  collected  from  the  receiver  under  a  statute 
requiring  the  tax  to  be  paid  by  the  bank.  (City  of  Boston  v.  Beal, 
51  Fed.  Rep.,  306;  S.  C,  55  Fed.  Rep.,  26.) 

Remedy  for  Illegal  Taxation. — If  the  tax  is  for  any  reason 
illegal  the  bank  may,  on  behalf  of  its  stockholders,  maintain  a 
suit  to  enjoin  the  collection  thereof.  (Cummiugs  v.  National 
Bank,  loi  U.  S.,  153;  Hills  v.  Exchange  Bank,  105  U.  S.,  319; 
Pelton  V.  Commercial  National  Bank,  loi  U.  S.,  143;  Boyer  v. 
Boyer,  113  U.  S.,  143;  Third  National  Bank  v.  Hughes,  76  Fed. 
Rep.,  385.)  But  two  banks  against  the  stock  of  which  separate 
assessments  have  been  made  can  not  join  in  such  a  suit.  (Jones 
V.  Rushville  National  Bank,  138  Ind.,  87.)  And  where  there  is  a 
statutory  tribunal  empowered  to  grant  full  relief  in  such  cases,  an 
injunction  will  not  be  issued  until  application  shall  have  first  been 
made  to  such  tribunal.  (Albuquerque  National  Bank  v.  Perea, 
147  U.  S.,  87;  First  National  Bank  v.  Bailey,  15  Mont,  301.  See 
Eaton  z;.  Union  County  National  Bank,  141  Ind.,  136;  Castles  z'. 
City  of  New  Orleans,  46  La.  Ann.,  542;  First  National  Bank  v. 
Brodhecker,  137  Ind.,  693.)  And  where  a  National  bank  seeks  an 
injunction  to  restrain  the  collection  of  a  tax  on  the  ground  of 
excessive  valuation  of  its  shares,  the  sum  admitted  to  be  due 
must  be  first  paid  or  tendered.  (Albuquerque  National  Bank  v. 
Perea,  147  U.  S.,  87.)  A  court  of  equity  has  jurisdiction  to  restrain 
the  sale  of  the  property  of  the  bank  for  taxes  assessed  upon  the 
stock  of  its  shareholders.  (Brown  v.  French,  80  Fed.  Rep.,  166.) 
And  an  action  for  this  purpose  may  be  maintained  by  the  Receiver 
of  an  insolvent  National  Bank.     (Z^) 

Pleading. — ^To  make  a  case  entitling  a  National  bank  to  relief, 
it  must  be  shown  that  there  is  a  discrimination  in  favor  of  some 
considerable  amount  of  other  moneyed  capital.  (Washington 
National  Bank  v.  King's  County,  9  Wash.,  607.)  The  classes  of 
unassessed  moneyed  capital  must  be  stated  with  succinct  particu- 
larity to  enable  the  court  to  judge  whether  they  belong  to  the  class 
contemplated  by  the  statute.  (-Z^)  An  allegation,  "all  the 
moneyed  capital  in  the  State  owned  by  resident  individual  citizens, 
and  invested  as  aforesaid  in  interest -bearing  loans,  discounts  and 
securities,  except  that  owned  by  and  invested  in  incorporated  banks 


"5 

located  in  this  State,"  is  too  general  a  description  of  the  capital,  in 
favor  of  which  there  is  discrimination.     (7^/.) 

96.    Bank  Examiners :   Duties,   Powers,  etc. 

Section  5240. — The  Comptroller  of  the  Currency,  with  the  approval  of  the 
Secretary  of  the  Treasury,  shall,  as  often  as  shall  be  deemed  necessary  or 
proper,  appoint  a  suitable  person  or  persons  to  make  an  examination  of  the 
affairs  of  every  banking  association,  who  shall  have  power  to  make  a 
thorough  examination  into  all  the  affairs  of  the  association,  and,  in  doin<^  so, 
to  examine  any  of  the  officers  and  agents  thereof  on  oath  ;  and  shall  make  a 
full  and  detailed  report  of  the  condition  of  the  association  to  the  Comptroller. 
All  persons  appointed  to  be  examiners  of  National  banks  not  located  in  the 
redemption  cities  specified  in  section  five  thousand  one  hundred  and  ninety- 
two  of  the  Revised  Statutes  of  the  United  States,  or  in  any  one  of  the  States 
of  Oregon,  California,  and  Nevada,  or  in  the  Territories,  shall  receive  com- 
pensation for  such  examination  as  follows  :  For  examining  National  banks 
having  a  capital  less  than  one  hundred  thousand  dollars,  twenty  dollars  • 
those  having  a  capital  of  one  hundred  thousand  dollars  and  less  than  three 
hundred  thousand  dollars,  twenty-five  dollars  ;  those  having  a  capital  of  three 
hundred  thousand  dollars  and  less  than  four  hundred  thousand  dollars, 
thirty-five  dollars ;  those  having  a  capital  of  four  hundred  thousand  dollars 
and  less  than  five  hundred  thousand  dollars,  forty  dollars ;  those  having  a 
capital  of  five  hundred  thousand  dollars  and  less  than  six  hundred  thousand 
dollars,  fifty  dollars ;  those  having  a  capital  of  six  hundred  thousand  dollars 
and  over,  seventy-five  dollars ;  which  amounts  shall  be  assessed  by  the 
Comptroller  of  the  Currency  upon,  and  paid  by,  the  respective  associations 
so  examined,  and  shall  be  in  lieu  of  the  compensation  and  mileage  heretofore 
allowed  for  making  said  examinations ;  and  persons  appointed  to  make  ex- 
aminations of  National  banks  in  the  cities  named  in  section  five  thousand 
one  hundred  and  ninety-two  of  the  Revised  Statutes  of  the  United  States,  or 
in  any  one  of  the  States  of  Oregon,  California,  and  Nevada,  or  in  the  Terri- 
tories, shall  receive  such  compensation  as  may  be  fixed  by  the  Secretary  of 
the  Treasury  upon  the  recommendation  of  the  Comptroller  of  the  Currency ; 
md  the  same  shall  be  assessed  and  paid  in  the  manner  hereinbefore  pro- 
vided. But  no  person  shall  be  appointed  to  examine  the  affairs  of  any  bank- 
ing association  of  which  he  is  a  director  or  other  officer. 

See  also  Act  of  July  12,  1882,  sec.  3,  par.  163. 

Examinations. — The  examinations  mentioned  in  this  section 
are,  as  a  rule,  made  about  once  a  year  in  the  case  of  each  National 
bank.  There  is  no  provision  as  to  the  number  of  persons  who 
may  be  employed  as  examiners  by  the  Comptroller,  or  the  number 
of  times  he  may  examine  each  bank  within  a  given  period.  In 
practice,  the  territory  of  the  United  States  is  laid  off  into  districts, 
which  districts  are,  however,  varied  from  time  to  time  to  suit  the 


ii6 

convenience  of  the  Comptroller's  office,  or  to  conform  to  its  views 
as  to  the  efficiency  of  the  sei-vice. 

Examiners. — A  National-bank  examiner  receives  a  regular 
appointment,  and  then  awaits  orders  from  the  Comptroller.  He 
may  be  assigned  to  a  district,  or  may  be  employed  at  large.  An 
examiner  may  be  employed  steadily  in  one  district,  or  he  may  be 
shifted  from  one  district  to  another.  There  is  no  fixed  salary. 
The  amount  earned  each  year  depends  on  the  number  of  banks 
which  each  examiner  has  assigned  to  him  for  examination.  When 
the  reports  are  received  from  the  examiners  they  are  scrutinized 
in  the  Comptroller' s  office,  and  if  they  indicate  faults  in  the  man- 
agement of  the  banks,  letters  are  addressed  usualh^  to  the  presi- 
dent or  cashier  calling  attention  to  the  points  where  improvement 
is  necessary ;  sometimes,  in  bad  cases,  the  directors  are  addressed 
either  singly  or  collectively.  The  examiners  from  time  to  time 
send  in  their  bill  to  the  Comptroller,  who,  finding  such  bills  cor- 
rect, assesses  each  bank  of  which  examination  has  been  made 
according  to  the  legal  rule.  When  the  money  is  paid  in  to  the 
Comptroller  by  the  banks  it  is  sent  to  the  examiner.  The  ex- 
aminer has  no  right  to  ask  a  bank  for  any  money  in  any  way, 
shape,  or  form.  His  dealings  are  with  the  Comptroller,  from 
whom  he  receives  his  directions  and  to  whom  he  renders  his  bills. 

97.     Limitation  of  Visitorial  Powers. 

Section  5241. — No  association  shall  be  subject  to  any  visitorial  powers 
other  than  such  as  are  authorized  by  this  Title,  or  are  vested  in  the  courts 
of  justice. 

The  only  visitorial  powers  mentioned  in  the  act  are  those  men- 
tioned in  the  preceding  section  and  in  Section  5210,  which  permits 
officers  authorized  to  assess  taxes  under  State  authority  to  inspect 
the  list  of  stockholders  during  business  hours.  There  are,  also, 
the  general  visitorial  powers  of  the  Comptroller  of  the  Currency. 
The  courts  of  justice  have,  of  course,  the  same  power  as  they  have 
over  other  persons  or  corporations,  and  subject  to  the  same  limita- 
tions of  jurisdiction. 

98.     Use  of  the  Word  "National"  in  the  Title. 

Section  5243. — All  banks  not  organized  and  transacting  business  under 
the  National  currency  laws,  or  under  this  Title,  and  all  persons  or  corpora- 
tions doing  the  business  of  bankers,  brokers,  or  savings  institutions,  except 


117 

savings  banks  authorized  by  Congress  to  use  the  word  "National"  as  part 
of  their  corporate  name,  are  prohibited  from  using  the  word  "  National  "  as  a 
portion  of  the  name  or  title  of  such  bank,  corporation,  firm,  or  partnership; 
and  any  violation  of  this  prohibition  committed  after  the  third  day  of  Sep- 
tember, eighteen  hundred  and  seventy-three,  shall  subject  the  party  charge- 
able therewith  to  a  penalty  of  fifty  dollars  for  each  day  during  which  it  is 
committed  or  repeated. 

The  penalty  under  this  section  is  a  general  one.  If  any  one  has 
knowledge  of  a  violation  of  this  provision  he  can  lay  a  complaint 
before  a  United  States  commissioner,  or  the  attention  of  the  United 
States  attorney  of  the  district  where  the  offense  has  been  committed 
can  be  called  to  it.  The  court  will  assume  that  a  bank  which 
includes  in  its  title  the  word  "  National  "  is  organized  under  the 
National  Bank  Act.  (Slaughter  v.  First  National  Bank  of  Mont- 
gomery, 109  Ala.,  157.) 


CHAPTER  V. 


DISSOLUTION  AND  RECEIVERSHIP. 


99.    Voluntary  Liquidation. 

Section  5220. — Any  association  may  go  into  liquidation  and  be  closed  by 
the  vote  of  its  shareholders  owning  two-thirds  of  its  stock. 

Shareholders'  Power  Under  this  Section. — Shareholders 
owning  two-thirds  of  the  stock  have  it  in  their  power  to  place  the 
bank  in  liquidation  at  any  time,  and  so  it  would  appear  that  the 
Comptroller's  consent  is  not  necessary ;  but  as  such  vote  does  not 
debar  the  Comptroller  from  passing  upon  the  bank's  solvency  and 
appointing  a  Receiver  if  insolvent,  he  should  be  promptly  in- 
formed of  the  intention  to  go  into  voluntary  liquidation. 

Shareholders'  Meeting. — The  action  must  be  taken  at  a  meet- 
ing of  stockholders  duly  assembled.  (See  note  to  Section  5144.) 
The  notice  of  meeting  should  clearly  indicate  the  business  to  be 
transacted.  The  vote  in  favor  of  the  liquidation  must  represent 
two-thirds  of  all  the  stock.  But  shareholders  owning  two-thirds 
of  the  stock  may  place  the  bank  in  liquidation,  though  this 
may  be  contrary  to  the  wishes,  and  against  the  interests,  of  the 
owners  of  the  minority  of  the  stock.  (Watkins  v.  National  Bank 
of  I,awrence,  51  Kans.,  254. 

A  person  who,  with  full  knowledge  of  all  the  steps  taken  in 
placing  a  bank  in  liquidation,  receives  and  retains  a  dividend  paid 
by  the  ofl&cers  in  control  of  the  liquidating  bank,  will  not  be  heard 
to  deny  the  validity  of  the  liquidation.  (^Id.  See  also  First  Na- 
tional Bank  of  Centralia  v.  Marshall,  26  111.  App.,  440.) 

New  Contracts. — After  a  National  bank  has  been  placed  in 
liquidation,  its  officers  have  no  authority  to  transact  any  business 
in  its  name,  except  such  as  is  implied  in  the  duty  of  winding  up 
its  aJBfairs.  (Richmond  v.  Irons,  121  U.  S.,  27;  Schroder  v.  Manu- 
facturers' National  Bank  of  Chicago,  133  U.  S.,  67;  Elwood  v. 
First  National  Bank,  41  Kans.,  475.)  Creditors  who,  after  the 
118 


119 

bank  has  suspended  payment  and  gone  into  liquidation,  receive  in 
settlement  of  their  claims  bills  receivable,  indorsed  or  guaranteed 
in  the  name  of  the  bank  by  its  President,  can  not  claim  as  creditors 
against  the  shareholders,  as  the  original  debt  is  paid.  (Elwood  v. 
First  National  Bank,  supra.) 

Corporate  Existence. — The  placing  of  the  bank  in  liquidation 
does  not  dissolve  it  as  a  corporation  ;  but  it  will  continue  to  exist 
as  a  body  corporate  for  the  purpose  of  suing  and  being  sued  until 
its  affairs  are  finally  closed.  (National  Bank  v.  Insurance  Com- 
pany, 104  U.  S.,  54;  Ordway  v.  Central  National  Bank,  47  Md., 
217.     But  see  Hodgson  v.  McKinstry,  3  Kans.  App.,  412.) 

Receiver. — Where  the  bank  is  insolvent  the  Comptroller  of  the 
Currency  may  appoint  a  receiver  therefor,  notwithstanding  the 
stockholders  have  voted  to  place  the  bank  in  liquidation.  (Wash- 
ington National  Bank  of  Tacoma  v.  Eckels,  57  Fed.  Rep.,  870.) 
And  a  court  of  competent  jurisdiction  may  appoint  a  receiver  for 
a  liquidating  bank,  where  the  bank  is  insolvent,  or  its  affairs  are 
being  mismanaged.  (Irons  ?'.  Manufacturers'  National  Bank,  6 
Biss.,  301 ;  Elwood  v.  First  National  Bank,  41  Kans.,  475.)  But 
the  appointment  of  a  receiver  rests  largely  within  the  discretion 
of  the  court,  and  before  it  will  take  the  property  and  business  of 
a  liquidating  bank  from  the  control  of  the  directors  into  its  own 
hands,  it  must  appear  that  the  danger  of  loss  or  injury  to  the 
rights  of  the  plaintiff  is  clearly  proved,  and  the  necessity  and  right 
for  the  appointment  of  a  receiver  free  from  reasonable  doubt. 
(Watkins  v.  National  Bank  of  L,awrence,  51  Kans.,  254.) 

Liquidating  Bank  as  Garnishee. — The  right  of  a  creditor  of  a 
depositor  to  make  the  bank  a  garnishee  is  not  affected  by  the  fact 
that  the  bank  has  gone  into  voluntary  liquidation.  (Birmingham 
National  Bank  v.  Mayer,  104  Ala.,  634.) 

Dividends. — Liquidation  dividends  of  a  National  bank  belong 
to  the  holder  of  shares,  whether  those  shares  be  recorded  upon  the 
books  of  the  bank  or  not,  and  must  be  paid  to  the  holder  of  such 
shares  on  demand.  The  negotiability  or  transferable  character  of 
the  stock  of  a  National  bank  depends  upon  the  laws  of  the  United 
States,  and  is  not  affected  by  State  laws.  (Bath  Savings  Institu- 
tion V.  Sagadahoc  National  Bank,  89  Maine  500.) 


I20 

For  suggestions  as  to  mode  of  placing  banks  in  liquidation,  see 
page  226,  and  for  forms,  see  page  228. 

100.    Notice  of  Intention  to  Go  into  Liquidation. 

Section  5221, — Whenever  a  vote  is  taken  to  go  into  liquidaiion  it  shall  be 
the  duty  of  the  board  of  directors  to  cause  notice  of  this  fact  to  be  certified, 
under  the  seal  of  the  association,  by  its  president  or  cashier,  to  the  Comp- 
troller of  the  Currency,  and  the  publication  thereof  to  be  made  for  a  period 
of  two  months  in  a  newspaper  pubhshed  in  the  city  of  New  York,  and  also 
in  a  newspaper  pubhshed  in  the  city  or  town  in  which  the  association  is 
located,  or  if  no  newspaper  is  there  published,  then  in  the  newspaper  pub- 
lished nearest  thereto,  that  the  association  is  closing  up  its  afifairs,  and  notify- 
ing the  holders  of  its  notes  and  other  creditors  to  present  the  notes  and 
other  claims  against  the  association  for  payment. 

Date  of  Liquidation. — The  liquidation  takes  effect  on  the  date 
of  the  vote  and  not  on  the  receipt  of  the  notice  by  the  Comp- 
troller, or  it  may  take  effect  on  some  future  date  fixed  in  that 
notice.  Thus  two-thirds  of  the  slock  ma}^  vote  to  liquidate ;  the 
vote  may  be  taken  on  the  third  of  the  month  ;  the  notice  may  be 
sent  on  the  sixth,  and  be  received  by  the  Comptroller  on  the 
ninth.  The  books  of  the  Comptroller's  ofiice  will  place  the  asso- 
ciation in  liquidation  on  the  third,  but  if  the  vote  be  taken  on  the 
third  to  commence  to  liquidate  the  association  on  the  twentieth, 
then,  although  the  Comptroller  as  before  may  receive  notice  on 
the  ninth,  yet  the  date  of  liquidation  will  be  the  twentieth. 

Notice,  Etc. — Blanks  for  certifying  the  notice  to  the  Comp- 
troller of  the  Currency  are  furnished  by  that  office,  and  can  be 
obtained  on  application  there  ;  also  form  to  be  used  in  making  the 
publication  required  by  the  section.     (See  forms,  page  228.) 

Insertion  of  notice  in  weekly  papers,  both  in  New  York  and  at 
home,  is  regarded  as  fulfilling  the  requirements  of  the  law.  The 
notice  should  appear  in  each  issue  of  the  paper  within  the  two 
months  from  the  date  of  the  first  issue  in  which  the  notice  appears. 

Process  of  Liquidation. — Associations  in  voluntary  liquida- 
tion retain  their  corporate  existence,  and  can  sue  or  be  sued  until 
their  affairs  are  finally  liquidated.  The  process  of  liquidation 
may  be  conducted  by  the  directors  and  officers  of  the  bank,  or  the 
directors  may  appoint  a  committee  from  their  own  number  for  the 
purpose.  In  any  event  it  is  better  to  keep  up  the  board  of  direc- 
tors by  regular  annual  elections  until  the  liquidation  is  complete- 


121 

The  usual  course  is  to  pay  depositors  in  full,  and  then,  as  funds 
are  realized  from  assets,  pay  pro  rata  dividends  to  stockholders. 
Usually  there  is  a  residue  of  deposits  which  are  not  called  for. 
Before  dividends  are  paid  to  stockholders  funds  to  meet  this  resi- 
due if  called  for  should  be  set  aside. 

loi.     Deposit  to  Redeem  Circulation. 

Skction  5222. — Within  six  months  from  the  date  of  the  vote  to  go  into 
liquidation,  the  association  shall  deposit  with  the  Treasurer  of  tiie  United 
States  lawful  money  of  the  United  States  sufficient  to  redeem  all  its  outstand- 
ing circulation.  The  Treasurer  shall  execute  duplicate  receipts  for  money 
thus  deposited,  and  deliver  one  to  the  association  and  the  other  to  the  Comp- 
troller of  the  Currency,  statinij  the  amount  received  by  him,  and  the  purpose 
for  wliich  it  has  been  received ;  and  the  money  shall  be  paid  into  the 
Treasury  of 'the  United  States,  and  placed  to  the  credit  of  such  association 
upon  redemption  account. 

Limit  of  Time. — If  not  otherwise  determined,  the  vote  to 
liquidate  takes  effect  immediately,  and  the  six  months  run  from 
that  date ;  but  if  the  vote  itself  is  that  the  liquidation  shall  take 
place  at  a  future  date,  then  that  future  date  is  the  actual  date  on 
which  the  vote  takes  effect,  and  the  six  months  run  therefrom. 

Lawful  Money. — Lawful  money  is  United  States  gold  coin, 
silver  dollars  or  legal-tender  notes. 

HoviT  Deposit  Made. — The  usual  method  is  to  make  the 
deposit  either  directly  or  through  a  correspondent  or  agent  with 
the  Treasurer  of  the  United  States  at  Washington,  or  an  Assistant 
Treasurer.  When  the  deposit  is  made  with  an  Assistant  Treasurer, 
he  issues  a  certificate  of  deposit  which  is  sent  to  Washington. 
When  the  deposit  is  made,  and  the  bank  has  paid  to  the  United 
States  Treasurer  all  amounts  due  for  taxes  on  circulation  and  all 
amounts  due  for  expenses  of  redeeming  notes,  its  bonds  on  deposit 
will  be  surrendered  to  it. 

102.    Consolidating  Banks  Need  not  Make  Deposit. 

Section  5223. — An  association  which  is  in  good  faith  ^^inding  up  its  busi- 
ness for  the  purpose  of  consolidating  with  another  association  shall  not  be 
required  to  deposit  lawful  money  for  its  outstanding  circulation  ;  but  its  assets 
and  liabilities  shall  be  reported  by  the  association  with  which  it  is  in  process 
of  consoHdation. 


122 

Obsolete  Provision,  Lawful  Money  Deposit  Required. — 

Although  this  section  still  stands  on  the  statute-book,  it  has  been 
regarded  as  obsolete  by  a  ruling  of  the  Comptroller's  ofi&ce.  That 
office  has  required  liquidating  banks,  no  matter  for  what  purpose 
they  are  winding  up,  to  deposit  lawful  money  in  all  cases.  The 
reasoning  appears  to  be  that  this  section  was  intended  to  enable 
banks  to  retain  all  their  circulation  at  a  time  when  the  law  fixed 
a  limit,  viz.,  $354,000,000,  on  the  aggregate  circulation,  and  when 
such  circulation  was  apportioned  according  to  wealth  and  popula- 
tion among  the  States  and  Territories.  As  there  is  now  no  limit 
on  the  circulation  which  may  be  issued  in  any  State,  there  is  not 
the  same  necessity  of  banks  adopting  the  plan  provided  for  in  this 
section  to  retain  in  the  consolidated  bank  the  circulation  issued  to 
each  of  the  two  banks  entering  into  the  consolidation.  There  are 
many  other  considerations  why  this  plan  is  not  a  good  one,  even 
if  legal,  at  the  present  time  ;  such  as  the  rights  of  stockholders,  etc. 

How  to  Consolidate. — The  best  plan,  if  two  banks  desire  to 
consolidate,  is  to  increase  (see  Section  5142)  the  capital  of  No.  i 
to  the  extent  necessary  to  equal  the  stock  of  both ;  put  No.  2  in 
liquidation  in  the  regular  way,  and  sell  out  its  assets  to  No.  i,  pay- 
ing for  them  in  the  increased  stock  to  be  distributed  among  stock- 
holders of  No.  2.  The  circulation  of  No.  2  being  provided  for 
by  a  deposit  of  lawful  money,  its  bonds  can  be  transferred  to  ac- 
count of  No.  I,  which  last  will  receive  circulation  thereon.  The 
whole  transaction  in  regard  to  circulation  need  not  occupy  over 
ten  days.  The  lawful  money  can  doubtless  be  borrowed  for  the 
necessary  time. 

103.    Re-assignment  of  Bonds,  Redemption  of  Notes,  etc. 

Section  5224. — Whenever  a  sufficient  deposit  of  lawful  money  to  redeem 
the  outstanding  circulation  of  an  association  proposing  to  close  its  business 
has  been  made,  the  bonds  deposited  by  the  association  to  secure  payment  of 
its  notes  shall  be  re-assigned  to  it,  in  the  manner  prescribed  by  section  fifty- 
one  hundred  and  sixty-two.  And  thereafter  the  association  and  its  share- 
holders shall  stand  discharged  from  all  liabilities  upon  the  circulating  notes, 
and  those  notes  shall  be  redeemed  at  the  Treasury  of  the  United  States. 
And  if  any  such  bank  shall  fail  to  make  the  deposit  and  take  up  its  bonds 
for  thirty  days  after  the  expiration  of  the  time  specified,  the  Comptroller  of 
the  Currency  shall  have  power  to  sell  the  bonds  pledged  for  the  circulation 
of  said  bank,  at  public  auction  in  New  York  city,  and  after  providing  for  the 
redemption  and  cancellation  of  said  circulation,  and  the  necessary  expenses 


123 

of   the  sale,  to  pay  over  any  balance  remaining  to  the  bank  or  its  legal 
representative. 

See  act  of  February  18, 1875,  correcting  Revised  Statutes. 

After  deposit  of  lawful  money  has  been  made,  and  bonds  with- 
drawn and  re-assigned,  the  notes  become  a  liability  of  the  United 
States.  It  will  be  observed  that  this  section  grants  thirty  days 
beyond  the  six  months  mentioned  in  Section  5222  before  the  bonds 
can  be  sold  by  the  Comptroller.  The  bank  will  probably,  as  a 
rule,  find  it  more  advantageous  to  dispose  of  its  own  bonds. 

104.    Destruction  of  Redeemed  Notes. 

Section  5225. — Whenever  the  Treasurer  has  redeemed  any  of  the  notes  of 
an  association  which  has  commenced  to  close  its  affairs  under  the  six  [five] 
preceding  sections,  he  shall  cause  the  notes  to  be  mutilated  and  charged  to 
the  redemption  account  of  the  association;  and  all  notes  so  redeemed  by  the 
Treasurer  shall,  every  three  months,  be  certified  to  and  burned  in  the  man- 
ner prescribed  in  section  fifty-one  hundred  and  eighty-four. 

See  act  of  June  23,  1874,  page  i66. 

105.    Mode  of  Protesting:  Notes. 

Section  5226. — Whenever  any  National  banking  association  fails  to  redeem 
in  the  lawful  money  of  the  United  States  any  of  its  circulating  notes,  upon 
demand  of  payment  duly  made  during  the  usual  hours  of  business,  at  the 
office  of  such  association,  or  at  its  designated  place  of  redemption,  the 
holder  may  cause  the  same  to  be  protested,  in  one  package  by  a  notary 
public,  unless  the  president  or  cashier  of  the  association  whose  notes  are 
presented  for  payment,  or  the  president  or  cashier  of  the  association  at  the 
place  at  which  they  are  redeemable  offers  to  waive  demand  and  notice  of  the 
protest,  and,  in  pursuance  of  such  offer,  makes,  signs,  and  delivers  to  the 
party  making  such  demand  an  admission  in  writing,  stating  the  time  of  the 
demand,  the  amount  demanded,  and  the  fact  of  the  non-payment  thereof. 
The  notary  public,  on  making  such  protest,  or  upon  receiving  such  admis- 
sion, shall  forthwith  forward  such  admission  or  notice  of  protest  to  the 
Comptroller  of  the  Currency,  retaining  a  copy  thereof.  If,  however,  satis- 
factory proof  is  produced  to  the  notary  public  that  the  payment  of  the  notes 
demanded  is  restrained  by  order  of  any  court  of  competent  jurisdiction,  he 
shall  not  protest  the  same.  When  the  holder  of  any  notes  causes  more  than 
one  note  or  package  to  be  protested  on  the  same  day,  he  shall  not  receive 
pay  for  more  than  one  protest. 

Redemption  After  Lawful  Money  Deposit. — It  is,  perhaps, 
open  to  dispute  whether  a  bank,  after  it  has  deposited  lawful 
money  to  retire  a  portion  of  its  circulation  under  the  act  of  June 


124 

20,  1 874)  par.  158,  is  obliged  to  redeem  its  notes  at  its  own  coun- 
ter until  the  deposit  of  lawiui  money  is  exhausted  by  presentation 
of  notes  at  the  Treasury.  In  other  words,  it  is  held  by  some  that 
while  lawful  money  remains  on  deposit  in  the  Treasury'  the  bank 
might  refuse  to  redeem  a  note  presented  at  its  own  counter,  and 
refer  the  presentor  to  the  Treasury.  However  this  may  be,  while 
Section  5226  is  in  force,  a  bank  might  place  itself  in  a  very  dis- 
agreeable position,  and  perhaps  injure  its  credit,  by  refusing  to 
redeem  any  of  its  notes  at  its  own  counter,  that  is,  so  long  as  it 
continues  a  going  bank. 

106.    Examination  by  Special  Agent. 

Section  5227. — On  receiving  notice  that  any  National  banking  association 
has  failed  to  redeem  any  of  its  circulating  notes,  as  specified  in  the  preceding 
section,  the  Comptroller  of  the  Currency,  with  the  concurrence  of  the  Secre- 
tary of  the  Treasury,  may  appoint  a  special  agent,  of  whose  appointment 
immediate  nolice  shall  be  given  to  such  association,  who  shall  immediately 
proceed  to  ascertain  whether  it  has  refused  to  pay  its  circulating  notes  in  the 
lawful  money  of  the  United  States,  when  demanded,  and  shall  report  to  the 
Comptroller  the  fact  so  ascertained.  If  from  such  protest,  and  the  report  so 
made,  the  Comptroller  is  satisfied  that  such  association  has  refused  to  pay  its 
circulating  notes  and  is  in  default,  he  shall,  within  thirty  days  after  he  has 
received  notice  of  such  failure,  declare  the  bonds  deposited  by  such  associa- 
tion forfeited  to  the  United  States,  and  they  shall  thereupon  be  so  forfeited. 

B07.  Not  to  do  Busaness  after  Protest  of  Notes. 
Section  5228. — After  a  default  on  the  part  of  an  association  to  pay  any  of 
its  circulatmg  notes  has  been  ascertained  by  the  Comptroller,  and  notice 
thereof  has  been  given  by  him  to  the  association,  it  shall  not  be  lawful  for 
the  association  suffering  the  same  to  pay  out  any  of  its  notes,  discount  any 
notes  or  bills  or  otherwise  prosecute  the  business  of  banking,  except  to 
receive  and  safely  keep  money  belonging  to  it,  and  to  deliver  special  deposits. 

See  act  of  February  18,  1875,  correcting  Revised  Statutes. 

108.    Redemption  of  Notes  at  Treasury. 

Section  5229. — Immediately  upon  declaring  the  bonds  of  an  association 
forfeited  for  non-payment  of  its  notes,  the  Comptroller  shall  give  notice,  in 
such  manner  as  the  Secretary  of  the  Treasury  shall,  by  general  rules  or  other- 
wise, direct,  to  the  holders  of  tlie  circulating  notes  of  such  association,  to 
present  them  for  payment  at  the  Treasury  of  the  United  States ;  and  the 
same  shall  be  paid  as  presented  in  lawful  money  of  the  United  States ; 
whereupon  the  Comptroller  may,  in  his  discretion,  cancel  an  amount  of 
bonds  pledged  by  such  association  equal  at  current  market  rates,  not  exceed- 
ing par,  to  the  notes  paid. 


125 

109-    Sale  of  Bonds ;  the  United  States  to  have  a  Lien  upon  Assets. 

Section  5230. — Whenever  the  Comptroller  has  become  satisfied,  by  the 
protest  or  the  waiver  and  admission  specified  in  section  fifty-two  hundred 
and  twenty-six,  or  by  the  report  provided  for  in  section  fifty-two  hundred  and 
twenty-seven,  that  any  association  has  refused  to  pay  its  circulating  notes,  he 
may,  instead  of  canceling  its  bonds,  cause  so  much  of  them  as  may  be 
necessary  to  redeem  its  outstanding  notes  to  be  sold  at  pubhc  auction  in  the 
city  of  New  York,  after  giving  thirty  days"  notice  of  such  sale  to  the  associa- 
tion. For  any  deficiency  in  the  proceeds  of  all  the  bonds  of  an  association, 
when  thus  sold,  to  reimburse  to  the  United  States  the  amount  expended  in 
paying  the  circulating  notes  of  the  association,  the  United  States  shall  have 
a  paramount  lien  upon  all  its  assets ;  and  such  deficiency  shall  be  made  good 
out  of  such  assets  in  preference  to  any  and  all  other  claims  whatsoever, 
except  the  necessary  costs  and  expenses  of  administering  the  same. 

no.    Sale  of  Bonds  at  Private  Sale. 

Section  5231. — The  Comptroller  may,  if  he  deems  it  for  the  interest  of  the 
United  States,  sell  at  private  sale  any  of  the  bonds  of  an  association  shown  to 
have  made  default  in  paying  its  notes,  and  receive  therefor  either  money  or 
the  circulating  notes  of  the  association.  But  no  such  bonds  shall  be  sold  by 
private  sale  for  less  than  par,  nor  for  less  than  the  market  value  thereof  at 
the  time  of  sale ;  and  no  sales  of  any  such  bonds,  either  public  or  private, 
shall  be  complete  until  the  transfer  of  the  bonds  shall  have  been  made  with 
the  formahties  prescribed  by  sections  fifty-one  hundred  and  sixty-two,  fifty- 
one  hundred  and  sixty-three,  and  fifty-one  hundred  and  sixty-four. 

This  section  gives  the  further  discretion  to  the  Comptroller  of 
selling  bonds  of  defaulting  associations  at  private  sale  at  full 
market  price,  not  less  than  par. 

in.    Disposition  to  be  Made  of  Notes  Redeemed  by  Treasurer. 

Section  5232. — The  Secretary  of  the  Treasury  may,  from  time  to  time, 
make  such  regulations  respecting  the  disposition  to  be  made  of  circulating 
notes  after  presentation  at  the  Treasury  of  the  United  States  for  payment, 
and  respecting  the  perpetuation  of  the  evidence  of  the  payment  thereof,  as 
may  seem  to  him  proper. 

Notes  of  Failed  Banks. — This  section  was  originally  part  of 
Section  47  of  the  act  of  June  3,  1864,  and  had  application  only  to 
notes  of  banks  in  default,  the  bonds  of  which  were  forfeited,  and 
which  notes  were  redeemed,  under  a  further  provision  of  the  same 
Section  47  (now  Section  5229  ante),  at  the  Treasury  of  the  United 
States. 


126 

Certificates  of  Destruction. — The  disposition  to  be  made  of 
this  particular  class  of  notes  is  left  to  the  discretion  of  the  Secre- 
tary of  the  Treasury.  If  Section  5232  as  it  now  stands  is  con- 
strued to  apply  solely  to  the  notes  of  banks  in  default  redeemed  at 
the  Treasury,  then  a  certificate  of  destruction  of  all  other  classes 
of  notes  redeemed  at  the  Treasury,  whether  of  banks  in  liquida- 
tion or  of  banks  retiring  circulation,  must  be  furnished  to  the 
respective  associations  issuing  the  notes,  as  the  mode  of  destruc- 
tion of  all  other  classes  of  notes  is  fixed  in  the  various  sections  of 
the  law  regarding  the  same  by  reference  to  Section  5184,  par.  63. 
(See  Section  5225,  par.  104;  Section  3  of  the  act  of  June  20,  1874, 
par  158;  Sections  6  and  7  of  the  act  of  July  12,  1882,  par  186, 
187  ;  and  Section  5184,  par.  39.) 

112.    Cancellation  of  Notes. 

Section  5233. — All  notes  of  National  banking  associations  presented  at 
the  Treasury  of  the  United  States  for  payment  shall,  on  being  paid,  be  can- 
celed. 

This  provision  is  modified  as  to  notes  fit  for  circulation  redeemed 
from  the  5  per  cent,  redemption  fund  by  the  act  of  June  20,  1874, 
Section  3,  which  permits  such  notes  to  be  returned  to  the  banks 
for  reissue. 

113.     Appointment  and  Duties  of  Receivers. 

Section  5234. — On  becoming  satisfied,  as  specified  in  sections  fifty-two  hun- 
dred and  twenty-six  and  fifty-two  hundred  and  twenty  seven,  that  any  asso- 
ciation has  refused  to  pay  its  circulating  notes  as  therein  mentioned,  and  is  in 
default,  the  Comptroller  of  the  Currency  may  forthwith  appoint  a  receiver, 
and  require  of  him  such  bond  and  security  as  he  deems  proper.  Such  re- 
ceiver, under  the  direction  of  the  Comptroller,  shall  take  possession  of  the 
books,  records,  and  assets  of  every  description  of  such  association,  collect  all 
debts,  dues  and  claims  belonging  to  it,  and,  upon  the  order  of  a  court  of 
record  of  competent  jurisdiction,  may  sell  or  compound  all  bad  or  doubtful 
debts,  and,  on  a  hke  order,  may  sell  all  the  real  and  personal  property  of 
such  association,  on  such  terms  as  the  court  shall  direct;  and  may,  if  neces- 
sary to  pay  the  debts  of  such  association,  enforce  the  individual  liabihty  of 
the  stockholders.  Such  receiver  shall  pay  over  all  money  so  made  to  the 
Treasurer  of  the  United  States,  subject  to  the  order  of  the  Comptroller,  and 
also  make  report  to  the  Comptroller  of  all  his  acts  and  proceedings. 

Decision  of  Comptroller. — Formerly,  when  a  bank  became 
insolvent,  it  was  necessary,  before  the  Comptroller  could  appoint 
a  receiver,  that  one  of  the  notes  of  the  bank  should  be  presented 


I  a/ 

aud  protested  for  non-payment ;  but  by  the  act  of  June  30,  1876, 
it  was  provided  that  a  receiver  might  be  appointed  whenever  the 
Comptroller  shall  become  satisfied  of  the  insolvency  of  the  bank. 

And  it  has  been  held  under  this  act  that  the  decision  of  the 
Comptroller  that  the  bank  is  insolvent  is  final,  and  is  not  reviewa- 
ble by  the  courts  (Washington  National  Bank  v.  Eckels,  57  Fed. 
Rep.,  870.)  Nor  is  the  Comptroller's  power  in  this  respect  limited 
by  the  authority  given  to  the  stockholders  under  Rev.  Stat.  U.  S., 
Sec.  5220,  to  place  the  bank  in  liquidation  (/<af.) ;  nor  by  the  act 
of  1876,  authorizing  the  appointment  of  an  '"agent"  for  the 
stockholders.     (^Id. ) 

Evidence. — In  making  the  appointment  the  Comptroller  is  not 
required  to  have  strictly  legal  evidence  of  the  facts  upon  which 
he  bases  his  action  ;  but  he  is  left  to  be  satisfied  as  best  he  can  be, 
under  the  peculiar  circumstances  of  each  case,  of  the  facts  and 
the  necessity  for  his  action.     (Piatt  v.  Beebe,  57  N.  Y.,  339.) 

Removal  of  Receiver. — The  receiver  appointed  by  the  Comp- 
troller may  be  removed  by  him  at  any  time.  (Kennedy  v.  Gib- 
son, 18  Wallace,  505.) 

Jurisdiction  of  Courts  to  Appoint  Receiver. — It  has  been 
held  in  several  cases  that  the  power  of  the  Comptroller  to  appoint 
a  receiver  is  not  exclusive,  and  that  a  court  of  equity  of  compe- 
tent jurisdiction  may  direct  a  receivership  where,  according  to  the 
rules  of  equity,  it  may  do  so  in  the  case  of  other  corporations.  (Irons 
V.  Manufacturers'  National  Bank,  6  Bissell,  301  ;  Wright  v.  Mer- 
chants' National  Bank,  i  Flippin,  561,)  That  a  receiver  may  be 
appointed  in  a  proper  case  by  a  Federal  court  for  a  bank  which 
has  gone  into  voluntary  liquidation,  there  is  no  question.  (Irons 
V.  Manufacturers'  National  Bank,  supra;  Richmond  z/.  Irons,  121 
U.  S.,  27.)  The  expenses  of  such  a  receiver  can  not,  however,  be 
charged  to  the  stockholders  as  a  part  of  their  statutory  liability. 
(Richmond  v.  Irons,  supra.) 

Proof  of  Insolvency. — The  return  of  an  execution  unsatisfied 
is  proof  of  the  insolvency  of  the  hank.  (Wheelock  v.  Kost,  77 
111.,  296.) 

Effect  of  Appointment  of  Receiver. — The  failure  of  a  bank 
and  the  seizure  thereof  by  the  Comptroller  of  the  Currency  ends 
the  exercise  of  volition  by  the  officers  of  the  bank,  suspends  the 


128 

payment  of  checks,  matures  all  demand  notes  held  by  the  bank, 
and  applies  to  the  payment  of  such  notes,  all  balance  on  the  books 
of  the  bank,  standing  to  the  credit  of  the  makers  of  the  notes. 
(Park  National  Bank  of  Chicago  v.  Niblack,  67  111.  App.,  583.) 
But  the  appointment  of  a  receiver  for  a  National  bank  by  the 
Comptroller  of  the  Currency  does  not  operate  to  dissolve  the  cor- 
poration. (Chemical  National  Bank  v.  Hartford  Deposit  Com- 
pany, 161  U.  S.,  I ;  Bank  of  Bethel  v.  Pahquioque  Bank,  14  Wall., 
383;  Chemical  National  Bank  v.  Hartford  Deposit  Company,  156 
111.,  522.)  And  after  passing  into  the  hands  of  a  receiver,  a  ^ 
National  bank  remains  liable  through  the  remainder  of  the  term, 
for  accrued  and  accruing  rent  under  a  lease  of  premises  occupied 
by  it,  although  the  receiver  may  have  abandoned  and  surrendered 
them.  (Chemical  National  Bank  v.  Hartford  Deposit  Company,  161 
IJ.  S.,  I.)  But  if  the  lessor  in  the  exercise  of  a  power  conferred  by 
the  lease,  re-enters  and  re-lets,  the  premises,  the  liability  of  the 
bank  thus  reletting  is  limited  to  the  rent  then  accrued  and  unpaid, 
and  the  diminution,  if  any,  in  the  rent  for  the  remainder  of  the 
term,  after  the  reletting.     {Id.^ 

Presentment  of  Paper.— Where  a  National  bank  has  been 
placed  in  the  hands  of  a  receiver  paper  payable  at  the  bank  should 
be  presented  at  the  ofl&ce  of  the  Receiver.  (Hutchison  v.  Crutcher, 
98  Tenn.,  421.)  Presentment  at  the  oflEice  of  the  receiver  is  not 
excused  because  the  receiver  has  removed  his  office  and  the  assets 
of  the  bank  to  another  building  in  the  same  place.     {Id.') 

Bankrupt  Law. — Insolvent  National  banks  can  be  wound  up 
onl}'  in  the  mode  provided  by  the  National-bank  act;  and  it  was 
held  that  the  bankrupt  act  had  no  application  to  them.  {In  re 
Manufacturers'  National  Bank,  5  Bissell,  499.) 

Questioning  Validity  of  Appointment. — The  legality  of  the 
appointment  of  a  receiver  can  not  be  inquired  into  by  the  debtors 
or  stockholders  of  the  bank  when  sued  by  him ;  as  to  them,  the 
action  of  the  Comptroller  in  making  the  appointment  is  conclusive 
until  set  aside  on  the  application  of  the  bank.  (Cadle  v.  Baker, 
20  Wallace,  650 ;  Peters  v.  Foster,  56  Hun,  607 ;  Young  v. 
Wempke,  46  Fed.  Rep.,  354.) 

Supervisory  Pov^^er  of  Comptroller. — The  receiver  is  the 
instrument  of  the  Comptroller,  and  is  subject  to  the  general  direc- 


129 

tion  of  that  officer.  (Kennedy  v.  Gibson,  8  Wallace,  505.)  But 
the  language  of  the  statute  that  the  receiver  shall  act  under  the 
direction  of  the  Comptroller  means  no  more  than  that  the  receiver 
shall  be  subject  to  the  direction  of  the  Comptroller;  it  does  not 
mean  that  he  shall  do  no  act  without  special  instructions.  Thus, 
he  may  bring  an  action  to  recover  an  ordinary  debt  due  to  the 
bank  without  having  received  special  instructions  from  the  Comp- 
troller to  do  so.     (Bank  z'   Kennedy,  17  Wallace,  19) 

Contracts  of  Receiver.— The  receiver  can  not  charge  the 
estate  of  the  bank  b}-  any  executory  contract,  unless  authorized  so 
to  do  by  the  provisions  of  the  law  and  the  order  of  a  court  of  com- 
petent jurisdiction  obtained  upon  the  terms  of  the  law.  (Kllis  v. 
Little,  27  Kans.,  701.)  Persons  dealing  with  him  are  bound  to 
take  notice  of  the  limitations  on  his  authority  ;  and  where  he  acts 
outside  of  his  functions,  and  beyond  his  authority,  the  estate  and 
the  property  of  the  bank  are  not  charged  thereby.     i^Id.') 

Sales  by  Receiver, — Before  the  receiver  can  sell  any  of  the 
property  of  the  bank  he  must  first  have  an  order  from  a  court  of 
competent  jurisdiction.      (Ellis  v.   Little,   27  Kans.,   707.)     And 
where  the  order  directs  him  to  sell,  he  can  not  exchange  or  trade 
the  property  for  other  property,     (/of.)     [See  also  Supplement.] 

A  sale  made  by  a  receiver  under  order  of  a  court  is  to  all  intents 
and  purposes  a  judicial  sale.  (/«  re  Third  National  Bank,  9  Biss., 
535;  4  Fed.  Rep.,  775.) 

Compounding  Debts.— Debts  due  to  a  National  bank  can  not 
be  compounded  upon  the  order  of  the  Comptroller  of  the  Currency  ; 
but  for  this  purpose  the  order  of  some  court  of  competent  jurisdic- 
tion is  required.  (Case  v.  Small,  10  Fed.  Rep.,  722.)  Such  an 
order  may  be  made  by  a  United  States  District  Court.  (Petition 
of  Piatt,  I  Benedict,  534.)  But  the  court  can  authorize  a  compo- 
sition of  only  such  claims  as  are  "bad  or  doubtful."  (Price  v. 
Yates,  2  Nat.  Bank  Cases,  204.)  It  is  questionable  whether  the 
court  has  power  to  authorize  the  compounding  of  the  statutory 
liability  of  a  stockholder  in  a  National  bank.  (/«  re  certain 
stockholders  of  the  California  National  Bank  of  San  Diego,  53 
Fed.  Rep.,  38;  Butler  v  Poole,  44  Fed.  Rep.,  586.)  But  even  if 
it  has  the  power,  the  court  will  refuse  to  compound  such  liability 
where  it  appears  that  some  of  the  stockholders  have  conveyed 


130 

away  their  property  for  the  purpose  of  avoiding  their  liability, 
though  it  appear  that  in  this  way  more  money  would  be  realized 
for  the  creditors.     {Id.)     [See  Amendment  in  Supplement.] 

Suits  By  and  Against  Receiver.— The  receiver  may  sue  either 

in  his  own  name  or  in  the  name  of  the  bank.  (National  Bank  v. 
Kennedy,  17  Wallace,  19.  j  And  a  creditor  may  bring  suit  either 
against  the  receiver  or  the  bank.  (Bank  of  Bethel  v.  Pahquioque 
Bank,  14  Wallace,  833)  Thus,  an  action  may  be  brought  against  a 
National  bank,  after  the  appointment  of  a  receiver,  to  recover  for 
rent  due  on  a  lease,  and  for  breach  of  the  terms  thereof;  and  the 
receiver  is  not  a  necessar}'  partj^  to  such  action.  (Chemical  Na- 
tional Bank  of  Chicago  v.  Hartford  Deposit  Co.,  156  111.,  522.)  In 
the  case  of  ordinary  debts  due  to  the  bank  the  receiver  may  bring 
a  suit  to  recover  them  without  special  directions  from  the  Comp- 
troller. {Id  )  But  when  the  individual  liability  of  the  stock- 
holders is  to  be  enforced,  the  receiver,  before  beginning  suit,  must 
have  the  direction  of  the  Comptroller.  The  determination  on  the 
part  of  tho.se  charged  with  winding  up  the  affairs  of  the  bank  to 
resort  to  this  ultimate  remedy  requires  the  exercise  of  due  consid- 
eration ;  and  a  receiver  ought  not  take  it  upon  himself  to  decide 
so  important  a  question  without  reference  to  the  Comptroller  under 
v/liose  direction  he  acts ;  and,  although  it  is  his  duty  to  collect  the 
assets  of  the  institution,  he  does  not  distribute  them,  and  can  not 
ordinarilj''  know,  without  reference  to  the  Comptroller,  whether  a 
prosecution  of  the  stockholders  will  be  necessary  or  not.  (Ken- 
nedy V.  Gibson.  8  Wallace,  505;  Bank  v.  Kennedj',  17  Wallace, 
19.)  But  a  letter  from  the  Comptroller,  directing  the  receiver  to 
institute  suit,  is  sufficient  evidence,  if  not  objected  to,  that  the 
Comptroller  has  decided  that  it  is  necessary  to  enforce  the  individ- 
ual liabilit}'^  of  the  stockholders.  (Bowden  v-  Johnson,  107  U.  S., 
251.)  While  a  creditor  of  a  National  bank  has  a  right  to  resort 
to  the  courts  to  have  his  claim  adjudicated  when  it  has  been  refused 
by  the  Comptroller  of  the  Currency,  it  is  doubtful  whether  the 
receiver  of  the  bank,  in  a  suit  in  which  the  Comptroller  of  the 
Currency  is  not  a  ])arty,  can  be  made  to  account  for  an  adminis- 
tration for  which  the  Comptroller  is  solely  responsible.     (Mervill 

V.  National  Bank  of  Jacksonville,  41  U.  S.  App.,  529.)     [See  also 

Supplement.] 

Jurisdiction  of  Federal  Court. — The  receiver  of  an  insolvent 
National  bank  may  bring  suit  in  a  Federal  court  to  collect  assets 


131 

of  the  bank  regardless  of  the  citizenship  of  the  parties.  (Fisher  v. 
Yader,  53  Fed.  Rep.,  565;  L,iuu  County  National  Bank  v.  Craw- 
ford, 69  Fed.  Rep.,  532.)  So,  a  suit  by  the  receiver  to  euCorce  the 
individual  liability  of  the  stockholders  in  a  case  arising  under  the 
laws  of  the  United  States,  and  where  the  amount  involved  exceeds 
$2000,  is  within  the  jurisdiction  of  the  United  States  Circuit  Court. 
(Thompson  v.  German  Insurance  Company,  76  Fed.  Rep.,  892.) 
And  so  a  suit  against  the  receiver  to  compel  him  to  pay  out  of  the 
funds  in  his  hands,  as  receiver,  moneys  claimed  by  the  complainant 
is  a  suit  arising  under  the  laws  of  the  United  States,  and  can  be 
removed  into  the  Federal  court.  (Hot  Springs  Independent 
School  District  v.  First  National  Bank  of  Hot  Springs,  61  Fed. 
Rep.,  417.)  And  the  question  whether  a  savings  bank  which  was 
a  depositor  with  a  National  bank  which  has  become  insolvent 
shall  be  paid  in  full  pursuant  to  a  State  statute,  is  a  question 
arising  under  the  laws  of  the  United  States,  and  entitles  the  receiver 
of  a  bank  when  sued  for  such  deposit  to  remove  the  case  into  the 
United  States  Circuit  Court.  (Auburn  Savings  Bank  v.  Hayes, 
61  Fed.  Rep.,  911.)  The  receiver  is  an  officer  of  the  United  States 
within  the  meaning  of  Section  563,  Rev.  Stat.  U.  S.,  which  gives 
the  District  Courts  jurisdiction  of  "all  suits  at  common  law 
brought  by  the  United  States,  or  any  officer  thereof  authorized  by 
law  to  sue."  (Stephens?^.  Bernays,  41  Fed.  Rep.,  401;  Stanton 
V.  Wilkinson,  8  Benedict,  357;  Price  v.  Abbott,  17  Fed.  Rep.,  506; 
Piatt  V.  Beach,  2  Benedict,  303.)  Where  the  receiver  takes  a  case 
by  appeal  or  writ  of  error  to  the  Supreme  Court  of  the  United 
States,  he  is  not  required  to  give  a  bond  to  an.swer  in  damages 
and  costs.     (Pacific  National  Bank  v.  Mixter,  114  U.  S.,  462.) 

State  Courts— State  Statutes. — In  New  York  it  is  said  that 
he  will  not  be  treated  b}'  the  courts  of  that  State  as  a  foreign  re- 
ceiver, and  can  sue  therein  to  recover  an  assessment  levied  on  the 
shareholder  of  a  bank  located  in  another  State.  (Peters  v.  Foster, 
56  Hun.,  607.)  And  being  a  person  expressly  authorized  to  sue, 
he  is  excepted  from  the  provisions  of  the  code  that  the  action  must 
be  brought  in  the  name  of  the  real  party  in  interest.  (Id.)  An 
action  by  a  receiver  against  the  stockholders  is  governed  by  the 
State  statute  of  limitations.     (Butler  v.  Poole,  44  Fed.  Rep.,  586.) 

District  Attorney— State  Statutes.— As  the  receiver  is  the 
agent  of  the  United  States,  suits  instituted  by  him  should,  under 


132 

Section  380,  Revised  Statutes,  par.  153,  be  conducted  by  the 
United  States  district  attorney  for  the  district,  but  this  provision 
is  only  directory,  and  if  the  receiver  employs  other  counsel  in  a 
suit  against  a  debtor  of  the  bank,  the  defendant  can  not  be  heard 
to  make  the  objection  that  this  duty  of  the  local  officer  of  the 
Government  has  been  devolved  upon  another.  (Kennedy  v.  Gib- 
son, 8  Wallace,  498.)  But  United  States  district  attorneys  are  not 
entitled  to  any  compensation,  in  addition  to  their  salaries,  for  con- 
ducting suits  brought  by  receivers  of  National  banks.  (Gibson  v. 
Peters,  150  U.  S.,  342.)  The  receiver  may  at  any  time  dismiss  an 
attorney  employed  by  him,  regularly  or  otherwise,  to  prosecute 
claims  of  the  bank,  and  employ  another  in  his  place,  whom  the 
court  will,  by  order,  substitute  in  the  place  of  the  dismissed  at- 
torney, except  as  to  such  cases  as  the  latter  may  have  commenced 
and  finished.  (7«  re  Herman,  50  Fed.  Rep.,  517.)  Where  a  con- 
tract has  been  entered  into  between  the  receiver  and  the  attorney 
that  the  latter  shall  receive  the  attorney's  fees  provided  for  in  the 
notes  he  was  employed  to  collect,  the  court  will  not  direct  the 
substitution  of  another  attorney  in  unfinished  cases  until  the  re- 
ceiver deposits  the  amount  of  the  attorney's  fees  reserved  in  the 
notes  as  a  security  to  the  dismissed  attorney  for  such  services  as 
he  may  have  rendered.     i^Id.') 

Suits  Against  Directors. — Suits  against  the  directors  for  neg- 
lect or  mismanagement  of  the  affairs  of  the  bank  should  usually 
be  brought  by  the  receiver,  but  if  the  receiver  refuses  to  act,  such 
suit  may  be  brought  by  any  shareholder  on  behalf  of  himself  and 
the  other  shareholders.  (Brinkerhofif  v.  Bostwick,  88  N.  Y.,  52.) 
And  so,  the  suit  may  be  brought  by  a  shareholder  on  behalf  of 
himself  and  the  other  shareholders  when  the  receiver  is  himself  a 
director  and  one  of  the  persons  charged  with  neglect  or  miscon- 
duct.    (/^.)     See  further  on  this  subject  note  to  Sec.  5239,  par.  118. 

Duties  of  Directors. — The  duty  of  the  directors  to  take  the 
necessary  steps  to  preserve  the  assets  of  the  bank  does  not  end 
merely  because  a  bank  examiner  has  taken  possession  of  the  bank 
by  direction  of  the  Comptroller  of  the  Currency.  (Robinson  v. 
Hall,  63  Fed.  Rep.,  222.)  Their  duties  as  directors  in  this  regard 
do  not  cease  until  a  receiver  has  been  appointed.  (^Td.')  Thus,  it 
would  be  their  duty  to  see  that  a  mortgage  given  to  the  bank  was 
duly  recorded,  notwithstanding  a  bank  examiner  was  in  charge. 


133 

114.     Advertisement  of  Comptroller  to  Creditors. 

Section  5235. — The  Comptroller  shall,  upon  appointing  a  receiver,  cause 
notice  to  be  given,  by  advertisement  in  such  newspaper  as  he  may  direct,  fur 
three  consecutive  months,  calling  on  all  persons  who  may  have  claims  against 
such  association  to  present  the  same,  and  to  make  legal  proof  thereof. 

115.     Dividends  to  Creditors. 

Section  5236. — From  time  to  time,  after  full  provision  has  been  first  made 
for  refunding  to  the  United  States  any  deficiency  in  redeeming  the  notes  of 
such  association,  the  Comptroller  shall  make  a  ratable  dividend  of  the  money 
so  paid  over  to  him  by  such  receiver  on  all  such  claims  as  may  have  been 
proved  to  his  satisfaction  or  adjudicated  in  a  court  of  competent  jurisdiction, 
and,  as  the  proceeds  of  the  assets  of  such  association  are  paid  over  to  him, 
shall  make  further  dividends  on  all  claims  previously  proved  or  adjudicated; 
and  the  remainder  of  the  proceeds,  if  any,  shall  be  paid  over  to  the  share- 
holders of  such  association,  or  their  legal  representatives,  in  proportion  to  the 
stock  by  them  respectively  held. 

How  Claims  Established. — The  claims  of  creditors  may  be 
proved  before  the  Comptroller  ;  or  established  by  suit  against  the 
bank.  But  creditors  must  seek  their  remedy  through  the  Comp 
troller  in  the  mode  prescribed  by  the  statute ;  they  can  not  proceed 
directly  in  their  own  names  against  the  stockholders  or  debtors  of 
the  bank.  (Kennedy  v.  Gibson,  8  Wallace,  505  ;  Bank  of  Bethel, 
Pahquioque  Bank,  14  Wallace,  383.)  The  decision  of  the  re- 
ceiver rejecting  a  claim  is  not  final,  but  the  creditor  still  has  the 
right  to  sue  therefor.  (Bethel  v.  Pahquioque  Bank,  10  Wallace, 
383.)  But  a  judgment  only  determines  the  validity  of  the  claim, 
and  the  creditor  must  await  the  pro-rata  distribution  by  the  Comp- 
troller, and  can  not  have  execution  on  his  judgment.  (/'■/.)  A 
judgment  against  the  receiver  directing  the  manner  in  which  the 
assets  of  the  bank  shall  be  distributed  should  be  certified  by  the 
receiver  to  the  Comptroller  of  the  Currenc}^  and  be  paid  in  due 
course  of  distribution.  (Mervill  v.  National  Bank  of  Jacksonville, 
41  U.  S.  App.,  529.) 

Interest. — Claims  when  proved  to  the  satisfaction  of  the  Comp- 
troller are  upon  the  same  footing  as  if  they  had  been  put  in  judg- 
ment, and  bear  interest  the  same  as  a  judgment.  (National  Bank 
of  Commonwealth  v.  Mechanics'  National  Bank,  94  U.  S.,  437.) 
But  a  creditor  who  has  obtained  a  judgment  against  the  bank  is 
not  entitled  to  interest  upon  the  face  of  the  judgment,  but  only 
upon  the  amount  of  the  claim  at  the  date  of  the  failure.    (White  v. 


134 

Knox,  III  U.  S.,  784.)  A  depositor  is  entitled  to  interest  from  the 
time  the  bank  suspends  payment,  and  it  is  not  necessary  that  he 
should  have  made  any  demand  on  the  bank.  (Chemical  National 
Bank  v.  Bailey,  12  Blatchford,  480.)  In  estimating  the  dividends 
to  be  paid  out  of  the  assets,  the  value  of  the  claims  at  the  time  the 
insolvency  is  declared  is  to  be  taken  as  the  basis  of  distribution, 
(White  V.  Knox,  iii  U.  S.,  784.)  Interest  should  be  allowed 
during  the  period  of  administration.  (National  Bank  of  Com- 
monwealth V.  Mechanics'  National  Bank,  94  U.  S.,  437;  White  v. 
Kuox,  III  U.  S.,  784.)  The  refusal  of  a  creditor  to  accept  the  re- 
ceiver's oflFer  to  allow  part  of  a  claim  without  prejudice  to  a  suit 
for  allowance  of  the  remainder,  or  to  the  receiver's  right  to  still 
further  reduce  the  claim  if  the  court  should  hold  such  reduction 
proper,  bars  the  creditor's  right  to  interest  on  subsequent  divi- 
dends on  the  part  offered  to  be  allowed,  although  it  is  subsequently 
adjudged  that  the  whole  of  his  claim  should  have  been  allowed; 
but  he  is  entitled  to  interest  on  the  dividends  on  the  part  rejected. 
(Chemical  National  Bank  v.  Armstrong,  59  Fed.  Rep.,  372.) 

Claims  for  Torts.  — Claims  which  arise  out  of  the  neglect  or 
wrongful  acts  of  the  bank  are  to  be  paid  out  of  the  assets  the 
same  as  the  debts,  technically  so  called.  (Turner  v.  First  National 
Bank,  26  Iowa,  562.) 

Collaterals. — The  creditors  of  an  insolvent  National  bank  in 
proving  their  claims  are  not  required  to  allow  anj-  credit  for  col- 
lections made  subsequent  to  the  declared  insolvenc}-  from  collateral 
held  by  them  to  secure  such  claims.  (Chemical  National  Bank  v. 
Armstrong,  59  Fed.  Rep.,  372;  Mervill  v.  National  Bank  of  Jack- 
sonville, 41  U.  S.  App.,  529.  See  also  People  v.  Remington,  121 
N.  Y.,  328.     [See  also  Supplement.] 

Claims  Due  the  United  States. — The  priority  of  the  United 

vStates  is  only  for  the  (leiicicncv  in  redeenung  the  notes  of  the 
bank.  (Cook  County  National  Bank  v.  United  States,  107  U.  S., 
445.)  Section  3466,  United  States  Revised  Statues,  which  gives 
the  United  States  a  priority  for  all  claims  due  it  from  insolvent 
debtors  does  not  apply.  {Id-^  As  against  the  proceeds  of  the 
bonds  deposited  to  secure  the  notes  of  the  bank,  the  United  States 
can  set  ofiFno  claim  except  for  such  deficiency.  {^J^.')  And  upon 
the  failure  of  a  National  bank,  its  five  per  cent,  redemption  fund 


135 

can  not  be  retained  by  the  Treasurer  to  pay  taxes  due  to  the 
United  States,  but  the  fund  passes  to  the  Comptroller  as  an  as.-ct 
of  the  association.     (Jackson  <'.  United  States,  20  Ct.  Cls-,  298.) 

Authority  of  the  Comptroller. — Under  Sections  5234  and  5236 
of  the  Revised  Statutes,  the  assets  of  an  insolvent  National  bank 
so  collected  by  the  receiver  are  entirely  within  the  control  and 
disposition  of  the  Comptroller  of  the  Currency,  and  the  receiver 
is  without  power  in  respect  to  the  payment  of  dividends.  The 
receiver  is  the  mere  instrument  of  the  Comptroller,  and  is  subject 
in  all  respects  to  his  instructions.  (Mervill  v.  National  Bank  of 
Jacksonville,  41  U.  S.  App.,  529.) 

Suits  on  Rejected  Claims. — Notwithstanding  the  insolvency 
of  a  National  bank,  and  the  appointment  of  a  receiver,  by  the 
Comptroller  of  the  Currency,  the  corporation  continues  as  a  legal 
entity,  and  an  action  may  be  maintained  against  it  on  a  claim  re- 
jected by  the  receiver.  (Denton  v.  Baker,  24  C-  C.  A.,  476  ;  79  Fed. 
Rep.,  189.)  As  in  such  case  there  is  an  adequate  remedy  at  law,  the 
holder  of  the  claim  cannot  maintain  a  suit  in  equity  for  an  injunc- 
tion to  restrain  the  receiver  from  rejecting  it.     (/'^Z.) 

Acceptance  of  Dividends— Estoppel.— The  acceptance  of  di- 
vidends upon  a  claim  against  an  insolvent  National  bank  as  al- 
lowed by  the  Comptroller  of  the  Currency  does  not  estop  tlie 
depositor  from  afterwards  maintaining  an  action  against  such  bank 
upon  a  claim  not  covered  by  such  allowance  of  the  Comptroller. 
(Chemical  National  Bank  of  Chicago  v.  World's  Columbian  Ex- 
position, 170  111.,  82.) 

116    Injunction  upon  Receivership. 

Section  5237. — Whenever  an  association  against  which  proceedings  have 
been  instituted,  on  account  of  any  alleged  refusal  to  redeem  its  circulating 
notes  as  aforesaid,  denies  having  failed  to  do  so,  it  may,  at  any  time  within 
ten  days  after  it  has  been  notified  of  the  appointment  of  an  agent,  as  pro- 
vided in  section  fifty-two  hundred  and  twenty-seven,  apply  to  the  nearest 
circuit,  or  district,  or  territorial  court  of  the  United  States  to  enjoin  further 
proceedings  in  the  premises ;  and  such  court,  after  citing  the  Comptroller  of 
the  Currency  to  show  cause  why  further  proceedings  should  not  be  enjoined, 
and  after  the  decision  of  the  court  or  finding  of  a  jury  that  such  association 
has  not  refused  to  redeem  its  circulating  notes,  when  legally  presented  in  the 
lawful  money  of  the  United  States,  shall  make  an  order  enjoining  the  Comp- 


136 

troUer,  and  any  receiver  acting  under  his  direction,  from  all  further  proceed- 
ings on  account  of  such  alleged  refusal. 

See  Section  736,  (par.  152.) 

This  section  gives  a  bank  opportunity  to  disprove  mistaken 
charges,  and  a  method  of  stopping  unwarranted  proceedings. 

117.    Receivership  Fees,  Expenses,  etc. 

Section  5238. — All  fees  for  protesting  the  notes  issued  by  any  National 
banking  association  shall  be  paid  by  the  person  procuring  the  protest  to  be 
made,  and  such  association  shall  be  hable  therefor ;  but  no  part  of  the  bonds 
deposited  by  such  association  shall  be  applied  to  the  payment  of  such  fees. 
All  expenses  of  any  preliminary  or  other  examinations  into  the  condition  of 
any  association  shall  be  paid  by  such  association.  All  expenses  of  any  re- 
ceivership shall  be  paid  out  of  the  assets  of  such  association  before  distribu- 
tion of  the  proceeds  thereof. 

Bxpenses  of  receivership  are  a  first  lien  upon  all  assets  except 
bonds  to  secure  circulation. 

118.     Violation  of  Title.    Penalty:   How  Determined,  etc. 

Section  5239. — If  the  directors  of  any  National  banking  association  shall 
knowingly  violate,  or  knowingly  permit  any  of  the  officers,  agents,  or  serv- 
ants of  the  association  to  violate  any  of  the  provisions  of  this  Title,  all  the 
rights,  privileges,  and  franchises  of  the  association  shall  be  thereby  forfeited. 
Such  violation  shall,  however,  be  determined  and  adjudged  by  a  proper  cir- 
cuit, district,  or  territorial  court  of  the  United  States,  in  a  suit  brought  for  that 
purpose  by  the  Comptroller  of  the  Currency,  in  his  own  name,  before  the  as- 
sociation shall  be  declared  dissolved.  And  in  cases  of  such  violation,  every 
director  who  participated  in  or  ass&nted  to  the  same  shall  be  held  liable  in 
his  personal  and  individual  capacity  for  all  damages  which  the  association,  its 
shareholders,  or  any  other  person,  shall  have  sustained  in  consequence  of 
such  violation. 

When  Liable. — To  render  a  National  bank  liable  to  a  forfeiture 
of  its  franchises  for  violation  of  law,  the  acts  must  have  been 
committed  by  the  directors,  or  have  been  knowingly  permitted  by 
them.  (Trenholm,  Comptroller  of  the  Currency,  v.  Commercial 
National  Bank  of  Dubuque,  38  Fed.  Rep.,  323.)  Violations  of 
law  by  the  executive  officers  or  agents  of  the  bank,  without  the 
knowledge  and  consent  of  the  directors,  do  not  constitute  grounds 
for  forfeiting  the  franchises.  (/^/)  And  in  an  information  to 
procure  the  forfeiture  of  the  bank's  franchises,  it  is  not  sufficient 
to  aver  that  the  association  committed  the  act  complained  of,  for 
this  averment  might  be  sustained  by  showing  that  the  act  was 


137 

committed  by  some  executive  officer  or  agent ;  but  the  information 
must  charge  that  the  act  was  done  by  the  directors,  or  that  they 
knowingly  permitted  it  to  be  done.  {I^i-)  Such  a  suit  is  within 
Section  1047,  Rev.  Stat.  U.  S.,  and  must  be  brought  within  five 
years.     (Welles  v.  Graves,  41  Fed.  Rep.,  459.) 

How  Action  Brought. — An  action  to  recover  damages  from 
the  directors  for  losses  resulting  from  a  violation  of  law  may  be 
brought,  though  the  Comptroller  of  the  Currency  has  not  pro- 
cured a  forfeiture  of  the  charter.  (Stephens  v.  Overstolz,  43  Fed. 
Rep.,  465.  But  see  Welles  v.  Graves,  41  Fed,  Rep.,  459.)  Where 
a  receiver  has  been  appointed  for  the  bank,  the  action  should  be 
brought  by  him ;  for  the  personal  liability  of  the  officers  and 
directors  is  an  asset  of  the  bank  belonging  equally  to  all  creditors, 
and  must  therefore  be  enforced  by  the  receiver  for  their  benefit  in 
proportion  to  the  amount  of  their  claims ;  and  the  action  can  not 
be  brought  by  a  creditor  (Bailey  v.  Mosher,  63  Fed.  Rep. ,  488  ; 
Exchange  Bank  v.  Peters,  45  Fed.  Rep.,  13);  nor  by  the  individ- 
ual stockholders  (Howe  7>.  Barney,  45  Fed.  Rep.,  668.)  But  where 
the  receiver  refuses  to  bring  an  action  against  negligent  directors 
to  recover  the  amount  which  the  shareholders  have  been  compelled 
to  contribute  to  pay  the  debts  of  the  association,  an  action  against 
such  directors  maj^  be  brought  by  a  shareholder  on  behalf  of  him- 
self and  the  other  shareholders.  (Nelson  v.  Burrows,  9  Abb.  N. 
C,  280.)  And  where  the  receiver  is  a  director,  and  one  of  the 
parties  charged  with  misconduct  and  against  whom  a  remedy  is 
sought,  the  action  may  be  brought  by  a  shareholder  on  behalf  of 
himself  and  the  other  shareholders.  (Brinkerhoff  z^.  Bostwick,  88 
N  Y.,  52.)  Such  an  action  may  be  brought  in  a  State  court.  {Id.) 
An  action  against  a  director  under  this  section  is  not  an  action  to 
recover  a  penalty,  and  is  therefore  not  within  Section  1047,  Rev. 
Stat.  U.  S.,  limiting  suits  for  any  penalty  or  forfeiture  accruing 
under  the  laws  of  the  United  States  to  five  years.  (Welles  v. 
Graves,  41  Fed.  Rep.,  459.) 

Statute  Remedial— Estate  Liable.— The  statute  is  remedial 
and  not  penal,  and  the  liability  of  the  director  does  not  expire 
with  his  death,  but  survives  against  his  estate.  (Stephens  v.  Over- 
stolz, 43  Fed.  Rep.,  465.) 

Action  in  Equity  or  at  Law.— As  to  whether  the  suit  against 
the  directors  should  be  brought  in  equity  or  at  law,  the  authorities 


138 

are  not  agreed.  (See  Stephens  z:  Overstolz,  43  Fed.  Rep.,  771; 
National  Exchange  Bank  of  Baltimore  v.  Peters,  44  Fed.  Rep., 
13;  Welles  r.  Graves,  41  Fed.  Rep.,  459;  Hirsh  v.  Jones,  56  Fed, 
Rep.,  137.)  The  liabilities  imposed  by  this  section  do  not  pre- 
clude a  common  law  action  of  deceit  against  the  directors  for 
false  and  fraudulent  representations  made  by  them.  (Prescott  v, 
Haughey,  65  Fed.  Rep.,  653.) 

119.    Insolvent  Banks,  Transfers,  Assignments,  etc.,  void. 

Section  5242.* — All  transfers  of  the  notes,  bonds,  bills  of  exchange,  or 
other  evidence  of  debt  owing  to  any  National  banking  association,  or  of  de- 
posits to  its  credit,  all  assignments  of  mortgages,  sureties  on  real  estate,  or  of 
judgments  or  decrees  in  its  favor;  all  deposits  of  money,  bullion,  or  other 
valuable  thing  for  its  use,  or  for  the  use  of  any  of  its  shareholders  or  creditors, 
and  all  payments  of  money  to  either,  made  after  the  commission  of  an  act  of 
insolvency,  or  in  contemplation  thereof,  made  with  a  view  to  prevent  the  ap- 
plication of  its  assets  in  the  manner  prescribed  by  this  chapter,  or  with  at 
view  to  the  preference  of  one  creditor  to  another,  except  in  payment  of  its  cir- 
culating notes,  shall  be  utterly  null  and  void.* 

Meaning  of  "  Insolvency." — The  term  "  insolvency  "  as  used 
in  this  section  has  the  same  meaning  as  it  has  in  the  National  bank- 
rupt law ;  that  is,  it  does  not  mean  an  absolute  inability  to  pay  at 
some  future  time,  upon  a  settlement  and  winding  up  of  the  bank's 
affairs,  but  a  present  inability  to  pay  in  the  ordinary  course  of 

business.     (Case  v.  Citizens'  Bank  of  Louisiana,  2  Woods,  23.) 

« 

^A^hat  Constitutes  Preference. — To  bring  a  transfer  of  assets 
within  the  operation  of  this  section,  it  is  not  necessary  that  the 
person  to  whom  they  are  transferred  should  know  of  the  insol- 
vency, but  it  is  sufficient  if  the  insolvency  is  in  the  contemplation 
of  the  bank  only.  (/rf'.  /  National  Security  Bank  v.  Butler,  129' 
U.  S.,  223.)  But  it  should  appear  that  the  money  was  paid  in 
contemplation  of  insolvency,  for  the  purpose  of  giving  a  prefer- 
ence, and  with  a  view  to  preventing  the  application  of  the  assets 
to  the  claims  of  creditors  generally.  (Hays  v.  Beardsley,  136 
N.  Y.,  299.)  And  the  fact  that  the  bank  was  known  to  be  insol- 
vent at  the  time  by  the  officer  making  payment  does  not  make  the 
payment  illegal,  where  the  person  receiving  payment  was  treated 
like  any  other  creditor,  and  the  object  was  not  to  give  a  preference 

*  For  part  of  Section  5242,  see  "Suits  and  Jurisdiction." 


139 

over  others.  (/'^O  If  the  person  receiving  payment  was  entirely 
ignorant  of  the  insolvency  of  the  bank,  and  acted  in  good  faith, 
the  fact  that  he  was  at  the  time  a  director  does  not  make  the  pay- 
ment illegal.  (/^/.)  It  will  be  presumed  that  any  transfer  of 
assets,  made  after  the  closing  of  the  bank  has  been  determined 
upon,  whereby  any  creditor  obtains  a  preference  over  other  credi- 
tors, was  made  with  the  intent  to  prefer.  (National  Security 
Bauk  V.  Price,  22  Fed.  Rep.,  697.)  But  it  is  not  a  preference 
unless  given  to  an  existing  creditor  to  secure  a  pre-existing  debt. 
(Casey  v.  Societe  de  Credit  Mobilier,  2  Woods,  77.)  And  if  the 
transaction  be  free  from  fraud  in  fact,  and  is  intended  merely  to 
adequately  protect  a  loan  made  at  the  time,  the  creditor  can  retain 
property  transferred  to  secure  such  loan  until  the  debt  be  paid, 
though  the  bank  is  insolvent  and  the  person  making  the  loan  has 
reason  at  the  time  to  believe  that  to  be  the  fact.  (Armstrong  v. 
Chemical  National  Bank,  41  Fed.  Rep.,  234.)  So,  where  the 
officers  of  a  bank,  which  was  in  danger  of  failing,  in  the  hope  of 
avoiding  a  failure,  pledged  certain  assets  to  a  depositor  in  order  to 
induce  him  to  allow  his  deposit  to  remain  with  the  bank,  it  was 
held  that  this  was  not  a  preference.  (Roberts  v.  Hill,  23  Fed. 
Rep.,  31.  See  also  Bell  v.  Hanover  National  Bank,  57  Fed.  Rep., 
821  )  vSo  where  certain  property  of  the  bank  had  been  attached, 
it  was  held  that  a  transfer  of  assets  to  secure  the  sureties  on 
a  bond  given  to  release  the  attachment  was  not  a  preference. 
(Price  V.  Coleman,  22  Fed.  Rep.,  694.)  And  where  a  bank  had  in 
good  faith  accepted  the  draft  of  a  National  bank  the  day  before 
the  latter' s  insolvency,  and  afterwards  paid  the  same,  it  was  held 
that  such  bank  might  apply  the  proceeds  of  collections  made  b}'' 
it  on  paper  in  its  possession  belonging  to  the  insolvent  bank,  to 
the  payment  of  the  debt,  since  its  lien  on  such  collections  ran  from 
the  date  of  the  acceptance.  {In  7-e  Armstrong,  41  Fed.  Rep.,  381.) 
Remittances  made  in  usual  course  of  business  to  a  correspondent 
before  an  act  of  insolvency  committed  are  not  preferences,  though 
the  bank  is  actually  insolvent  at  the  time,  and  is  closed  by  the 
Comptroller  of  the  Currency  before  the  remittances  are  received 
by  the  correspondent.  (Hajden  v.  Chemical  National  Bank,  80 
Fed.  Rep.,  587.)  Notes  given  in  renewal  of  other  notes  held  by  a 
National  bank,  the  original  notes  not  being  returned  to  the  maker, 
are  not  "evidences  of  debt"  or  "assets"  within  the  meaning  of 
this  section.  (First  National  Bank  of  Decatur  v.  Johnston,  97 
Ala.,  655.)     [See  also  Supplement.] 


I40 

Deposits    Made    "When    Bank    Insolvent — Recovery   of. — 

Upon  the  general  ground  that  one  who  has  been  induced  to  part 
with  his  property  by  the  fraud  of  another,  under  the  guise  of  a 
contract,  may,  upon  discovery  of  the  fraud,  rescind  the  contract 
and  reclaim  the  property,  it  has  been  held  that  a  depositor  in  a 
National  bank  may  recover  funds  deposited  after  the  bank  has 
become  hopelessly  insolvent,  it  being  considered  a  gross  fraud  on 
the  part  of  the  bank  to  receive  them  under  such  circumstances, 
and  that  it  is  not  a  preference  for  him  to  so  reclaim  his  deposit, 
because  in  such  case  he  does  not  claim  under  a  transfer  from  the 
bank,  but  under  his  original  title,  and  he  does  not  seek  to  enforce 
any  right  as  creditor  of  the  bank,  but  merely  to  reclaim  his  own 
property  obtained  by  fraud.  (Cragie  v.  Hadley,  99  N.  Y.,  131.) 
And  the  fact  that  the  money  deposited  was  not  marked,  and,  by  a 
mingling  with  the  other  funds  of  the  bank,  lost  its  identitj^,  does 
not  affect  the  right  of  the  depositor  to  recover  in  full,  if  it  can  be 
traced  into  the  vault  of  the  bank,  and  it  appears  that  a  sum  equiva- 
lent thereto  remained  continuously  on  hand  in  the  bank  until 
removed  by  the  receiver.  (Massey  v.  Fisher,  62  Fed.  Rep.,  958.) 
But  the  moneys  or  paper  deposited  or  the  proceeds  thereof  must 
be  traced  into  the  hands  of  the  receiver.  (Multnomah  County  v. 
Oregon  National  Bank,  61  Fed.  Rep.  ,912;  Spokane  County  v. 
Clark,  61  Fed.  Rep.,  538;  Ivake  Erie,  Etc.,  R.  R  Co.  v.  Indian- 
apolis National  Bank,  65  Fed.  Rep.,  690.  Compare  San  Diego 
County  V.  California  National  Bank,  52  Fed.  Rep.,  59.)  Hence, 
where  a  bank  which  had  received  a  note  for  collection  and  remit- 
tance, and  had  not  remitted,  failed  with  cash  on  hand  less  than  the 
amount  of  the  collection,  it  was  held  that  the  lien  for  trust  funds 
converted  was  limited  to  the  amount  on  hand,  and  did  not  extend 
to  the  other  assets  of  the  bank,  where  there  was  no  proof  that 
they  were  obtained  with  the  money  converted.  (Boone  County 
National  Bank  v.  I^atimer,  67  Fed.  Rep.,  27.)  A  creditor  of  an 
insolvent  National  bank,  whose  demand  grows  out  of  a  fraudulent 
transaction  perpetrated  by  the  officers  of  the  bank  in  contempla- 
tion of  the  immediate  wrecking  of  their  corporation,  does  not 
thereby  become  entitled  to  a  preference  over  the  general  creditors 
of  the  bank.  (Citizens'  National  Bank  v.  Dowd,  35  Fed.  Rep., 
340.)     [See  Amendment  in  Supplement.] 

Action  of  Replevin. — A  person  claiming  title  to  property  in  the 
possession  of  a  receiver  which  has  come  into  his  possession  with 


141 

the  property  belonging  to  the  bank,  may  maintain  an  action  of 
replevin  therefor.  (Corn  Exchange  Bank  z:  Blye,  loi  N.  Y.,  303.) 
Hence,  where  money  was  deposittd  with  the  receiving  teller  of  a 
bank  a  few  minutes  before  the  bank  closed  its  doors,  to  be  credited 
to  his  account,  and  the  teller  not  being  aware  of  the  impending 
failure,  after  crediting  the  amount  in  the  depositor's  pass  book, 
put  tlie  money  and  deposit  ticket  to  one  side,  and  before  the  entry 
was  made  in  the  books  of  the  bank,  it  closed  its  doors,  and  the 
money  was  by  order  of  the  directors  placed  apart,  and  in  that  con- 
dition delivered  to  the  receiver,  it  was  held  that  the  depositor  could 
replevy  tlie  money  so  deposited.  (Faber  v.  Stephens,  35  Fed. 
Rep.,  17.) 

Set  Off. — This  section  does  not  prohibit  the  allowance  of  any 
valid  set-off,  legal  or  equitable,  which  a  debtor  of  a  bank  may  have 
against  any  obligation  owing  by  him  to  it  at  the  time  of  its  insol- 
vency. (Armstrong,  Receiver,  v.  Warner,  49  Ohio  St.,  376;  Scott 
7'.  Armstrong,  146  U.  S.,  499.)  A  depositor  may  therefore  set-off 
the  amount  of  his  deposit  against  his  liability  as  maker  or  endorser 
of  a  note  held  by  the  receiver,  though  such  note  had  not  matured 
when  the  bank  was  closed,  and  the  receiver  appointed.  (Scott  v. 
Armstrong,  146  U.  S.,  499;  Yardley  v.  Clothier,  49  Fed.  Rep., 
337  ;  51  Fed.  Rep.,  506;  Adams  ?'.  Spokane  Drug  Co.,  57  Fed.  Rep., 
888;  Mercer  7>.  Dyer,  15  Mont.,  317  ;  Hughitt  v.  Ha)-es,  136  N.  Y., 
163.)  But  the  debtor  of  the  bank  will  not  be  permitted  to  set-off 
against  his  liability  a  claim  against  the  bank  assigned  to  him  after 
the  bank  had  closed  its  doors.  (Venango  National  Bank  ?•.  Ta)'- 
lor,  56  Pa.  St.,  14),  though  the  assignment  was  made  before  the 
appointment  of  a  receiver  (Davis  v.  Kuipp,  92  Hun.,  297;  Beck- 
ham 7>.  Shackelford,  8  Tex.  Cir.  App.,  660).  The  court  will  not 
be  astute  to  divide  the  day  into  fractions  to  defeat  a  right  of  set-off 
claimed  by  a  creditor  of  an  insolvent  National  bank.  (Faber  v. 
Hanover  National  Bank,  64  Fed.  Rep.,  832.) 

Against  the  proceeds  of  the  bonds  deposited  to  secure  circula- 
tion the  United  States  can  set-off  no  claim,  except  for  money  ad- 
vanced to  redeem  notes.  (Cook  County  National  Bank  v.  United 
States,  107. U.  S.,  544) 

The  indebtedness  of  the  stockholders  on  their  individual  lia- 
bility, together  with  the  other  assets  of  the  insolvent  bank,  con- 
stitute a  trust  fund  for  the  benefit  of  its  creditors ;  and  in  equity 
such  indebtedness  of  a  stockholder  who  is  insolvent  may  be  set-off 


142 

against  a  dividend  payable  out  of  the  trust  fund,  on  a  balance  due 
him  on  his  deposit  account  with  the  bank  at  the  time  of  its  failure. 
(King  V.  Armstrong,  50  Ohio  St.,  222.) 

An  assignment  by  the  stockholder  of  his  claim  against  the  bank, 
before  the  direction  of  the  Comptroller  to  enforce  his  liability,  but 
after  the  insolvency  of  the  bank,  does  not  affect  the  right  to  set-off 
his  liability  against  the  dividend  due  on  his  claim,  nor  does  the 
fact  that  the  Comptroller,  at  the  time  of  the  assignment,  had  not 
determined  the  amount  necessary  to  be  collected  from  the  stock- 
holders for  the  payment  of  the  creditors.  It  is  sufficient  that  such 
direction  has  been  given,  and  amount  so  determined  when  the 
set-off  is  made-     (/'/.) 

State  Statute— Debt  Due  Savings  Bank.— A  State  statute 
directing  that  deposits  made  by  savings  banks  shall  be  first  paid 
out  of  the  assets  of  an  insolvent  bank  can  have  no  application  to 
an  insolvent  National  bauk,  since  such  statute  is  in  conflict  with 
the  provisions  of  the  National-bank  Act.  (Davis  7).  The  Elmira 
Savings  Bank,  161  U.  S.,  275,  reversing  S.  C,  142  N.  Y.,  590.) 
A  State  statute  forbidding  conveyances  by  insolvent  debtors  for 
the  purpose  of  giving  a  preference  applies  to  such  conveyance 
made  to  a  National  bank.  (Traders'  National  Bank  v.  Chipman, 
164  U.  vS.,  347.)  Such  a  statute  is  not  in  conflict  with  any  provi- 
.sions  of  the  National   Bank  Act.     (/^/.) 

Federal  Question. — The  question  whether  a  Savings  bank 
which  was  a  depositor  with  a  National  bank  which  has  become 
insolvent  shall  be  paid  in  full  pursuant  to  State  statute  is  a  ques- 
tion arising  under  the  laws  of  the  United  States,  and  entitles  the 
receiver  of  the  bank  when  sued  for  such  deposit  to  remove  the  case 
into  the  United  States  Circuit  Court.  (Auburn  Savings  Bank  v. 
Hayes,  61  Fed.  Rep.,  911.) 


CHAPTER  VI. 


TAX  ON   UNAUTHORIZED  CIRCULATION. 


lao.    Capital  of  State  Bank  Converted  into  National  Bank. 

Section  3410. — The  capital  of  any  State  Bank  or  banking  association 
■which  has  ceased  or  shall  cease  to  exist,  or  which  has  been  or  shall  be  con- 
verted into  a  National  bank,  shall  be  assumed  to  be  the  capital  as  it  existed 
immediately  before  such  bank  ceased  to  exist  or  was  converted  as  aforesaid. 

The  act  of  March  3,  1863,  repealed  laws  taxing  capital  of  both 
State  and  National  banks. 

121.     Circulation  :  When  Exempted  from  Tax. 

Section  3411. — Whenever  the  outstanding  circulation  of  any  bank,  asso- 
ciation, corporation,  company,  or  person  is  reduced  to  an  amount  not  ex- 
ceeding five  per  centum  of  the  chartered  or  declared  capital  existing  at  the 
time  the  same  was  issued,  said  circulation  shall  be  free  from  taxation ;  and 
whenever  any  bank  which  has  ceased  to  issue  notes  for  circulation,  deposits 
in  the  Treasury  of  the  United  States,  in  lawful  money,  the  amount  of  its  out- 
standing circulation,  to  be  redeemed  at  par,  under  such  regulations  as  the 
Secretary  of  the  Treasury  shall  prescribe,  it  shall  be  exempt  from  any  tax 
upon  such  circulation. 

See  act  of  July  12,  1882,  Sections  6  and  8. 

This  section  refers  to  State  as  well  as  National  banks.  State 
bank  circulation  has  now  been  mostly  retired,  and  National  banks 
ceasing  to  issue  circulation  generally  deposit  lawful  money. 

122.    Tax  on  Notes  of  State  Banks,  etc.,  used  for  Circulation. 

Section  3412.— Every  National  banking  association.  State  bank,  or  State 
banking  association  shall  pay  a  tax  often  per  centum  on  the  amount  of  notes 
of  any  person,  or  of  any  State  bank,  or  State  banking  association,  used  for  cir- 
culation and  paid  out  by  them. 

See  act  of  February  8,  1875,  Sections  19  and  20. 
This  prevents  the  circulation  of  notes  issued  by  persons  or  State 
banks. 

143 


144 

123-    Tax  on  Notes  off  Cities,  etc  ,  used  for  Circulation. 

Section  3413. — Every  National  banking  association,  State  bank,  or  banker, 
or  association,  shall  pay  a  tax  of  ten  per  centum  on  the  amount  of  notes  of 
any  town,  city,  or  municipal  corporation,  paid  out  by  them. 

See  act  of  February  8,  1875,  Sections  ig  and  20,  par.  170. 
This  section  is  intended  to  prevent  the  issue  of  notes  by  cities, 
towns,  or  municipal  corporations. 

124.    Monthly  Returns  of  Notes  of  State  Banks,  Cities,  etc..  Used. 

Section  3414. — A  true  and  complete  return  of  the  monthly  amount  of 
circulation,  of  deposits,  and  of  capital,  as  aforesaid,  and  of  the  monthly 
amount  of  notes  of  persons,  town,  city,  or  municipal  corporations.  State 
banks,  or  State  banking  associations  paid  out  as  aforesaid  for  the  previous 
six  months,  shall  be  made  and  rendered  in  duplicate  on  the  first  day  of 
December  and  the  first  day  of  June,  by  each  of  such  banks,  associations,  cor- 
porations, companies,  or  persons,  with  a  declaration  annexed  thereto,  under  the 
oath  of  such  person,  or  of  the  president  or  cashier  of  such  bank,  association, 
corporation,  or  company,  in  such  form  and  manner  as  may  be  prescribed  by 
the  Commissioner  of  Internal  Revenue,  that  the  same  contains  a  true  and 
faithful  statement  of  the  amounts  subject  to  tax,  as  aforesaid;  and  one  copy 
shall  be  transmitted  to  the  collector  of  the  district  in  which  any  such  bank, 
association,  corporation,  or  company  is  situated,  or  in  which  such  person  has 
his  place  of  business,  and  one  copy  to  the  Commissioner  of  Internal  Revenue. 

See  act  of  February  8,  1875,  Section  21,  par.  173. 
It  is  believed  that  very  few  notes  of  the  description  mentioned 
are  now  issued. 

135.    In  Default  of  Returns,  Commissioner  to  Estimate. 

Section  3415. — In  default  of  the  returns  provided  in  the  preceding  section, 
the  amount  of  circulation,  deposit,  capital,  and  notes  of  persons,  town,  city, 
and  municipal  corporations,  State  banks,  and  State  banking  associations  paid 
out,  as  aforesaid,  shall  be  estimated  by  the  Commissioner  of  Internal  Reve- 
nue, upon  the  best  information  he  can  obtain.  And  for  any  refusal  or 
neglect  to  make  return  and  payment,  any  such  bank,  association,  corpora- 
tion, company,  or  person  so  in  default  sh?ll  pay  a  penalty  of  two  hundred 
dollars,  besides  the  additional  penalty  and  forfeitures  provided  in  other  cases. 

126.    Returns  for  Converted  State  Bank. 

Section  3416, — Whenever  any  State  bar^k  or  banking  association  has 
been  converted  into  a  National  banking  association,  and  such  National 
banking  association  has  assumed  the  liabilities  of  such  State  bank  or  bank- 
ing association,  including  the  redemption  of  its  bills,  by  any  agreement  or 


H5 

understanding  whatever  with  the  representatives  of  such  State  bank  or  bank- 
ing association,  such  National  banking  association  shall  be  held  to  make  the 
required  return  and  payment  on  the  circulation  outstanding,  so  long  as  such 
circulation  shall  exceed  five  per  centum  of  the  capital  before  such  conversion 
of  such  State  bank  or  banking  association. 

Probably  there  are  now  no  cases  under  this  section, 

137.    ProvisJons  for  Tax  on  Deposits,  Capital,  and  Circulation  not  to 

apply  to  National  Banks. 

Section  3417. —  The  provisions  of  this  chapter,  relating  to  the  tax  on  the 
deposits,  capital,  and  circulation  of  banks,  and  to  their  returns,  except  as 
contained  in  sections  thirty-four  hundred  and  ten,  thirty-four  hundred  and 
eleven,  thirty-four  hundred  and  twelve,  thirty-four  hundred  and  thirteen,  and 
thirty-four  hundred  and  sixteen,  and  such  parts  of  sections  thirty-four  hun- 
dred and  fourteen  and  thirty-four  hundred  and  fifteen  as  relate  to  the  tax  of 
ten  per  centum  on  certain  notes,  shall  not  apply  to  associations  which  are 
taxed  under  and  by  virtue  of  Title,  "  National  Banks." 

The  constitutionality  of  the  taxes  imposed  bj'  the  preceding  sec- 
tions has  been  sustained  by  the  Supreme  Court  of  the  United 
States.  ( Veazie  Bank  ?'.  Fenno,  8  Wallace,  533 ;  Merchants' 
National  Bank  v.  United  States,  loi  U.  S.,  i.)  In  Veazie  Bank 
V.  Fenno  it  was  said:  "  Having  thus  in  the  exercise  of  undisputed 
constitutional  powers  undertaken  to  provide  a  currency  for  the 
whole  country,  it  can  not  be  questioned  that  Congress  may,  con- 
stitutionall)',  secure  the  benefit  of  it  to  the  people  by  appropriate 
legislation.  To  this  end  Congress  has  denied  the  qualit}-  of  legal 
tender  to  foreign  coins,  and  has  provided  by  law  against  the  im- 
position of  counterfeit  and  base  coin  on  the  community.  To  the 
same  end  Congress  may  restrain,  by  suitable  enactments,  the  cir- 
culation as  money  of  any  notes  not  issued  under  its  own  authority. 
Without  this  power,  indeed,  its  attempts  to  secure  a  sound  and 
uniform  currency  for  the  country  must  be  futile."  These  taxes 
are  not  direct  taxes.     (See  cases  cited  above.) 

128.    United  State  Securities  Exempt  from  Local  Taxation. 

Section  3701. — All  stocks,  bonds.  Treasury  notes,  and  other  obligations 
of  the  United  States  shall  be  exempt  from  taxation  by  or  under  State  or 
municipal  or  local  authority.* 


"See  also  in  this  connection  section  5413. 
10 


CHAPTER  VII. 


CRIMES  AND  MISDEMEANORS. 


135.    Penalty  for  Unlawfully  Countersigning  Notes. 

'  Section  5187. — No  officer  acting  under  the  provisions  of  this  Title  shall 
countersign  or  deliver  to  any  association,  or  to  any  other  company  or  person, 
any  circulating  notes  contemplated  by  this  Title,  except  in  accordance  with 
the  true  intent  and  meaning  of  its  provisions.  Every  officer  who  violates 
this  section  shall  be  deemed  guilty  of  a  high  misdemeanor,  and  shall  be  fined 
not  more  than  double  the  amount  so  countersigned  and  delivered,  and  im- 
prisoned not  less  than  one  year  and  not  more  than  fifteen  years. 

This  applies  to  oflScers  of  the  Government.  No  cases  have  arisen 
under  it  since  the  National  banking  law  went  into  force. 

136.     United  States  or  National=Bank  Notes  as  Security ;  Penalty. 

Section  5207. — No  association  shall  hereafter  offer  or  receive  United 
States  notes  or  National-bank  notes  as  security  or  as  collateral  security  for 
any  loan  of  money,  or  for  a  consideration  agree  to  withhold  the  same  from 
use,  or  offer  or  receive  the  custody  or  promise  of  custody  of  such  notes  as 
security,  or  as  collateral  security,  or  consideration  for  any  loan  of  money. 
Any  association  offending  against  the  provisions  of  this  section  shall  be 
deemed  guilty  of  a  misdemeanor,  and  shall  be  fined  not  more  than  one 
thousand  dollars  and  a  further  sum  equal  to  one-third  of  the  money  so 
loaned.  The  officer  or  officers  of  any  association  who  shall  make  any  such 
loans  shall  be  liable  for  a  further  sum  equal  to  one-quarter  of  the  money 
loaned ;  and  any  fine  or  penalty  incurred  by  a  violation  of  this  section  shall 
be  recoverable  for  the  benefit  of  the  party  bringing  such  suit. 

This  was  designed  to  prevent  the  locking  tip  of  money.  It  was 
aimed  at  a  favorite  method  of  accomplishing  this  at  one  time  put 
in  practice  in  New  York  city,  and,  perhaps,  elsewhere. 

137.    Penalty  for  Embezzlement. 

Section  5209. — Every  president,  director,  cashier,  teller,  clerk,  or  agent  of 

any  association,  who  embezzles,  abstracts,  or  wilfully  misapplies  any  of  the 

moneys,  funds,  or  credits  of  the  .association  ;  or  who,  without  authority  from 

the  directors,  issues  or  puts  in  circulation  any  of  the  notes  of  the  association; 

146 


147 

or  who,  without  such  authority,  issues  or  puts  forth  any  certificate  of  deposit, 
draws  any  order  or  bill  of  exchange,  makes  any  acceptance,  assigns  any 
note,  bond,  draft,  bill  of  exchange,  mortgage,  judgment,  or  decree;  or  who 
makes  any  false  entry  in  any  book,  report,  or  statement  of  the  association, 
with  intent,  in  either  case,  to  injure  or  defraud  the  association  or  any  other 
company,  body  politic  or  corporate,  or  any  individual  person,  or  to  deceive 
any  officer  of  the  association,  or  any  agent  appointed  to  examine  the  affairs 
of  any  such  association  ;  and  every  person  who  with  like  intent  aids  or  abets 
any  officer,  clerk,  or  agent  in  any  violation  of  this  section,  shall  be  deemed 
guilty  of  a  misdemeanor,  and  shall  be  imprisoned  not  less  than  five  years  nor 
more  than  ten.  , 

Willful  Misapplication  and  Abstraction, — The  words  "will- 
fully misapplies"  are  new  in  statutes  creating  offenses,  and  they 
are  not  used  in  describing  any  offense  at  common  law.  They  have 
no  settled  technical  meaning  like  the  word  "  embezzle"  as  used  in 
the  statutes,  or  the  words  "steal,  take,  and  carry  away  "  as  used 
at  common  law.  (United  States  v.  Britton,  107  U.  S.,  655.)  To 
constitute  the  offense  the  misapplication  must  have  been  for  the 
use  or  benefit  of  the  party  charged,  or  of  some  person  or  company 
other  than  the  bank,  with  intent  to  injure  and  defraud  the  bank, 
or  some  other  body  corporate,  or  some  natural  person.  (Z^-)  It 
is  something  different  from  the  acts  of  official  maladministration 
referred  to  in  Section  5239.  (/</.)  It  is  not  necessary  that  the 
person  charged  with  the  offense  should  have  been  previously  in 
the  actual  possession  of  such  moneys,  funds,  and  credits  under  or 
by  virtue  of  any  trust,  duty,  or  employment  committed  to  him. 
Nor  is  it  necessary  to  the  commission  of  this  offense  that  the  officer 
making  the  willful  misapplication  should  derive  any  personal 
benefit  therefrom.  When  the  funds  or  assets  of  the  bank  are 
unlawfully  taken  from  its  possession,  and  afterward  willfully  mis- 
applied by  converting  them  to  the  use  of  any  person  other  than 
the  bank,  with  intent  to  injure  and  defraud,  the  offense,  as 
described  in  the  statute,  is  committed.  (United  States  v.  Harper, 
33  Fed.  Rep.,  471.)  The  act  may  be  done  directly  and  personally, 
or  it  may  be  done  indirectly  through  the  agency  of  another.  If 
the  ofiicer  charged  with  it  has  such  control,  direction,  and  power 
of  management  by  virtue  of  his  relation  to  the  bank  as  to  direct  an 
application  of  its  funds  in  such  manner  and  under  such  circum- 
stances as  to  constitute  the  offense  of  willful  misapplication,  and 
actually  makes  such  direction,  or  causes  such  misapplication  to  be 
made,  he  is  equally  guilty  as  if  it  was  done  by  his  own  hands. 


148 

(United  States  v.  Harper,  33  Fed.  Rep.,  471 ;  United  States  v.  Fish, 
24  Fed.  Rep.,  585.)  A  loan  made  in  bad  faith,  and  with  the  inten- 
tion of  defrauding  the  bank,  is  a  willful  misapplication  of  its  funds. 
(United  States  v.  Fish,  siipra.)  So  is  the  allowance  of  a  fraudu- 
lent overdraft.  (/«  re  Van  Campeu,  2  Benedict,  419.)  And  a 
bank  president  has  no  right  to  permit  overdrafts,  when  he  does 
not  believe,  and  has  no  reasonable  grounds  to  believe,  that  the 
moneys  can  be  repaid  ;  and  if  coupled  with  such  wrongful  act,  the 
proof  establishes  that  he  intended  by  the  transaction  to  injure  and 
defraud  the  bank,  the  wrongful  act  becomes  a  crime.  (Cofi5n  v. 
United  States,  162  U.  S.,  664.)  But  the  mere  fact  of  the  payment 
by  the  oflBcers  of  a  national  bank  of  a  check  which  creates  an  over- 
draft does  not  necessarily  constitute  a  fraudulent  misapplication  of 
the  funds  of  the  bank.  (Dow  v.  United  States,  32  Fed.  Rep.,  904.) 
The  procuring  of  a  dividend  to  be  declared  by  the  bank  when 
there  are  no  net  profits  to  pay  it,  is  not  such  an  offense.  (United 
States  V.  Britton,  108  U.  S.,  199.)  Nor  to  allow  a  customer  in- 
debted to  the  bank  to  withdraw  his  deposit,  though  such  act 
might  be  an  act  of  maladministration  on  the  part  of  the  officer,  and 
a  gross  neglect  of  official  duty.  (United  States  v.  Britton,  108  U. 
S.,  193.)  Nor  for  an  officer  to  procure  the  discounting  by  the  bank 
of  his  own  note,  though  he  and  the  other  parties  to  the  note  are 
insolvent.  (/^/.)  It  is  no  defense  that  the  funds  were  misapplied 
with  the  consent  of  some  of  the  directors ;  but  the  intent  to  defraud 
will  be  conclusively  presumed  from  the  commission  of  the  offense. 
(United  States  v.  Taintor,  11  Blatchford,  374.) 

False  Entries. — Any  entry  on  the  books  of  the  bank  which  is 
intentionally  made  to  represent  what  is  not  true,  with  intent  either 
to  defraud  the  bank  or  to  deceive  its  officers,  is  a  false  entry  within 
the  meaning  of  this  section,  (Agnew  v.  United  States,  165  U-  S., 
36;  United  States  v.  Harper,  33  Fed.  Rep.,  471.)  If  the  false  entry 
is  calculated  to  deceive,  the  making  of  it  in  the  books  of  the  bank, 
with  intent  to  deceive,  is  all  that  is  necessary  to  bring  the  act 
within  the  meaning  of  the  statute ;  and  the  fact  that  the  act  was 
not  an  adroit  and  skillful  one  does  not  relieve  it  of  its  criminal 
character.  (United  States  v.  Britton,  107  U.  S.,  655.)  The  eras- 
ure of  figures  already  written  in  the  books  of  the  bank,  and  the 
substitution  of  other  figures  which  falsify  the  state  of  the  account, 
are  a  false  entry.  (United  States  v.  Crecelius,  34  Fed.  Rep.,  30.) 
The    entries    may   be   made   either   personally   or   by   direction. 


149 

(Aj^new  V.  United  States,  165  U.  S.,  36;  United  Stales  v.  Harper, 
33  Fed.  Rep.,  471;  In  re  Van  Campen,  2  Benedict,  419;  United 
States  V.  Allen,  47  Fed.  Rep.  696.)  The  entry  upon  the  books  of 
the  bank  from  deposit  slips,  which  contain  fal^e  statements,  is  a 
false  entry  within  the  statute.  (Agnew  v.  United  States,  165  U.  S. 
36.)  But  it  is  not  merely  the  making  of  false  entries  which  is 
criminal,  but  the  making  them  with  intent  to  deceive  such  persons 
as  those  named  in  the  statute.  (United  States  v.  Means  et  al,  42 
Fed.  Rep  ,  599.)  A  mere  mistake,  made  inadvertently,  or  even 
through  negligence,  though  in  fact  false,  if  believed  by  the  officer 
making  it  to  be  true,  will  not  constitute  the  offense.  (United 
States  V.  Graves,  53  Fed.  Rep.,  700;  United  States  v.  Allen,  47 
Fed.  Rep.,  696.)  Intention  to  deceive  any  one  director  or  officer 
is  as  criminal  under  tliis  section  as  the  intention  to  deceive  any 
number  or  all  of  them.  (United  States  v.  Means,  42  Fed.  Rep., 
599.)  And  the  statute  does  not  require  that  any  penson  should 
have  been  in  fact  defrauded  or  actually  deceived  bj-  the  false  entry 
in  order  to  make  the  crime  complete  ;  if  there  was  an  attempt  to 
deceive,  and  the  false  entry  was  knowingly  entered,  and  was  a 
false  entry  which  was  naturally  and  necessarily  calculated  to  mis- 
lead, this  would  be  sufficient,  in  the  absence  of  contravening 
proof,  to  authorize  a  finding  that  the  person  making  it,  made  it 
with  intent  to  deceive.  (United  States  v.  Graves,  53  Fed.  Rep., 
700.)  But  if  the  officers  alleged  to  have  been  deceived  were  ac- 
complices in  the  fraudulent  speculations  which  the  false  entries 
were  made  to  hide,  an  intent  to  deceive  them  cannot  be  inferred. 
(United  States  v.  Means,  42  Fed.  Rep.,  599.) 

False  entries  in  a  report  made  by  the  President  and  transmitted 
to  the  Comptroller  of  the  Currency,  constitute  this  offense,  though 
the  report  was  not  called  for  by  the  Comptroller.  (United  States 
r-.  Hughitt,  45  Fed.  Rep.,  47.)  A  false  statement  is  a  crime 
though  done  to  save  the  bank.  (United  States  v.  Means,  42  Fed. 
Rep.,  599.)  Directors  are  officers  within  the  meaning  of  the 
statute.     (United  States  v.  Means,  42  Fed.  Rep.,  599.) 

It  is  no  defense  that  the  entries  were  made  by  a  clerk  and  veri- 
fied by  the  officer  without  actual  knowledge  of  their  truth,  since 
it  was  his  duty  to  inform  himself  (United  States  v.  Allen,  47 
Fed.  Rep.,  696.) 

The  assistant  cashier  is  indictable  under  this  section  for  making 
a  false  entry  in  a  report  to  the  Comptroller,  although  he  is  not  one 
of  the  officers  authorized  by  Section  521 1   to  make  such  a  report; 


ISO 

for  he  may  be  regarded  as  withiu  the  category  of  ' '  clerk  or  agent, ' '' 
witbin  the  terms  of  this  section.  (Cochran  v.  United  States,  157 
U.  S.,  286.) 

The  president  and  assistant  cashier  are  indictable  as  principals, 
under  this  section,  for  making  a  false  entr}'  in  a  report,  although 
neither  of  them  actually  signed  or  attested  the  report,     i-^^.) 

Where  false  entries  were  made  by  a  bookkeeper  in  a  statement 
requested  by  a  National-bank  examiner  purporting  to  give  the 
balance  due  to  depositors,  which  statement  it  was  the  duty  of  the 
examiner  to  make  and  not  the  bookkeeper,  an  indictment  for 
making  "  false  entries  in  a  statement  of  the  association  "  will  not 
be  sustained.     (United  States  v.  Ege,  49  Fed.  Rep.,  852.) 

When  the  managers  of  a  National  bank  make  arrangements 
with  depositors  in  the  bank  to  gi,ve  them  credit  at  the  bank  for 
larger  sums  than  appear  upon  the  ci-edit  side  of  their  accounts  up 
to  specified  amounts  and  for  a  fixed  time,  and  the  proper  ofiicers 
of  the  bank  make  entries  thereof  in  the  books  of  the  bank  in  good 
faith  and  in  the  belief  that  they  have  a  right  to  do  so,  such  an 
entry  is  not  a  false  entry  within  the  meaning  of  that  term  as  used 
in  Rev.  Stat.  Sec.  5209,  and  the  person  so  making  it  is  not  guilty 
of  a  violation  of  that  statute  in  so  doing.  (Graves  v.  United 
States,  165  U.  S.,  323.) 

If  an  overdi^aft  is  made  and  allowed  inider  circumstances  mak- 
ing it  a  fraud  upon  the  bank,  the  entrj^  of  the  transactions  just  as 
it  occurred  on  the  books  of  the  bank,  is  not  a  false  entry  under 
this  section.     (Dow  v.  United  States,  82  Fed.  Rep.,  904.) 

Forgery  by  an  ofiicer  of  a  National  bank  for  the  purpose  of 
defrauding  the  bank  or  its  stockholders  does  not  constitute  the 
offense  described  in  Section  5418,  Revised  Statutes  of  the  United 
States,  and  is  not  an  offense  against  the  United  States,  cognizable 
only  by  the  Federal  courts.  (Cross  e-.  State  of  North  Carohna, 
132  U.  S.,  131.) 

Form  of  Report. — A  National  bank  is  not  required  to  confonu 
the  headings  of  the  various  accounts  on  its  books  to  any  pre- 
scribed names,  nor  to  the  names  stated  in  the  form  of  report  pre- 
scribed by  the  Comptroller,  and  therefore  vv^hen  a  report  is  called 
for,  if  the  person  making  it  enters,  under  the  headings  in  the  pre- 
scribed form,  a  statement  of  the  bank's  condition  which  is  true 
with  respect  to  the  headings  in  said  form,  he  has  fulfilled  the 
demands  of  the  law.  (United  States  v.  Graves,  53  Fed.  Rep.,  634.) 


151 

But  where  the  form  of  report,  as  prescribed  by  the  Comptroller, 
contains  headings  of  "  Loans  and  Discounts,"  and  also  of  "  Over- 
drafts," it  is  the  duty  of  the  bank  officer  to  make  his  entries  in 
in  such  report  in  such  manner  tiiat  each  of  these  headings  shall 
truthfully  state  the  condition  of  his  bank  as  to  such  heading. 
(United  States  v.  Graves,  53  Fed.  Rep.,  634.) 

It  is  not  a  "  false  entry  "  to  enter  under  heading  of  ' '  Loans  and 
Discounts  "  items  which,  on  books  of  the  bank,  and  for  convenience 
of  its  officers,  have  been  temporarily  withdrawn  from  that  heading, 
and  which  are,  from  day  to  day,  carried  on  the  books  of  the  bank 
under  heading  of  "Suspended  loans"  while  awaiting  action  of 
directors  as  to  same  being  withdrawn  from  character  of  loans  and 
entered  up  as  a  loss  on  profit  and  loss  account.     (/<a^.) 

The  "liabilities,"  which  are  required  by  this  section  to  be  stated 
in  the  reports  to  the  Comptroller,  include  contingent  as  well  as 
absolute  liabilitities  ;  and  hence  an  unmatured  note,  payment  of 
which  at  maturity  is  guaranteed  b}'  the  bank,  should  be  included 
in  the  list  of  liabilities.    (Cochran  v.  United  States,  157  U-  S.,  286). 

As  a  director  is  personally  liable  to  the  bank  on  paper  made  to 
it  by  a  firm  of  which  he  is  a  member,  the  amount  of  such  paper 
should  be  entered  under  the  heading  of  "  Liabilities  of  directors 
(individual  and  firm)  as  payers."  (United  States  v.  Graves,  63 
Fed.  Rep.,  634.) 

The  entry  of  "Loans  and  Discounts"  in  reports  to  the  Comp- 
troller does  not  guarantee  the  solvency  of  the  makers  of  the  paper, 
but  is  a  statement  that  in  truth  and  fact,  at  the  date  named  in  the 
report,  the  bank  actually  held  and  owned  loans  and  discounts  to 
the  aggregate  so  reported.     {^Id.') 

Aiding  and  Abetting. — Persons  who  are  not  officers  or  agents 
of  the  bank  may  be  aiders  and  abetters  of  the  officers  in  the  viola- 
tion of  this  section.     (Coffin  v.  United  States,  162  U.  S.,  664.) 

When  Criminal  Laws  of  State  Apply. — As  the  offense  of 
embezzlement  of  the  funds  and  property  of  the  bank  are  provided 
for  in  the  National  banking  law,  an  officer  of  the  bank  can  not  be 
indicted  therefor  under  State  laws,  nor  have  the  State  courts  juris- 
diction of  such  offense.  (Commonwealth  v.  Ketner,  92  Pa.  St., 
372;  Commonwealth  z'.  Felton,  loi  Mass.,  204.)  But  where  the 
property  fraudulently  converted  belongs  to  the  customers  of  the 
bank,  as  for  instance,  property  left  on  special  deposit,  the  criminal 


152 

laws  of  the  State  apply.  (State  v.  TuUer,  34  Conii.,  280;  Com- 
monwealch  v.  Tenney,  97  Mass.,  50.)  In  State  v.  TuUer  it  was 
said:  "That  provision  [in  respect  to  embezzlement]  goes  to  the 
being  an  internal  working  of  the  bank,  and  is  intended  to  protect 
its  property  from  its  agents.  It  was  not  intended  to  regulate,  and 
has  not  the  eflfect  of  regulating  the  business  of  the  bank  with  its 
customers.  Now,  the  business  of  the  bank  is  conducted  within 
the  jurisdiction  of  this  State  with  our  citizens  and  in  conformity 
with  our  laws,  and  it  is  competent  for  the  legislature  to  pass  any 
laws  affecting  that  business,  or  protect  the  bank  or  its  customers 
in  the  conduct  of  that  business  by  any  penalty,  and  such  law  and 
penalty  will  not  be  predicated  on  any  law  or  offense  created  by 
Congress  or  have  any  relation  or  be  repugnant  to  the  currency 
act,  or  in  any  manner  infringe  the  jurisdiction  of  Congress  or  the 
Federal  courts.  It  is  theft  by  our  law  to  steal  from  a  National 
bank ;  it  is  burglary  to  break  into  one  for  the  purpose  of  stealing, 
and  it  is  cheating  to  obtain  money  from  one  by  false  pretenses. 
As  a  corporate  being  located  in  the  State  its  property  and  interests 
and  business  are  protected  b)'  State  laws  and  subject  to  vState 
legislation,  and  so  it  is  competent  for  the  legislature  to  protect  its 
customers,  the  citizens  of  the  State,  in  their  business  dealings 
with  it,  whatever  they  may  be,  whether  constituting  the  relation 
of  borrower  and  lender  or  of  special  or  general  depositor  and 
bailee;  and  they  may  be  controlled  and  protected  by  penal  enact- 
ments without  interference  with  the  laws  of  Congress. ' ' 

I^arceny  of  the  funds  or  property  of  the  bank  is  punishable 
under  State  laws.  (Commonwealth  v.  Barry,  116  Mass.,  i.)  And 
an  ofl&cer  of  a  National  bank  may  be  indicted  for  forgery  under 
State  laws,  although  such  forgery  might  have  been  committed  in 
order  that  the  instrument  forged  might  thereafter  become  the 
basis  of  false  entries  upon  the  books  of  the  bank,  within  this  sec- 
tion. (Cross  z'.  State  of  North  Carolina,  132  U.  S-,  131.)  So  an 
officer  of  the  bank  may  be  indicted  under  a  State  statute  for  mak- 
ing false  and  fraudulent  entries  in  the  books  of  the  bank,  such 
offense  amounting  to  forgery  at  common  law.  (lyuberg  v.  Com- 
monwealth, 94  Pa.  St.,  85.)  But  the  State  courts  have  no  juris- 
diction of  the  crime  of  "  false  entries  "  as  defined  by  this  section. 
(/«  re  Eno,  54  Fed.  Rep.,  669.)  It  has  been  held  in  some  vStates 
that  an  officer  of  a  National  bank  may  be  indicted  under  a  State 
statute  for  receiving  deposits  when  the  bank  is  insolvent.  (State 
V.  Fields  (Iowa),  62  N.  W.  Rep.,  653 ;  State  v.  Bardwell,  72  Miss., 


153 

535-)  But  in  Alabama  and  Kansas  it  has  been  held  that  the 
statutes  of  those  States  making  it  a  crime  to  receive  deposits  when 
the  bank  is  insolvent  have  no  application  to  the  National  banks. 
(Slaughter  v.  First  National  Bank,  109  Ala.,  157  ;  State  v.  Menke, 
52  Bankers'  Magazine,  335.)  Prior  to  the  Act  of  February  26, 
1881,  a  notary  public  holding  his  commission  under  a  State  had 
no  authority  to  administer  the  oath  required  by  Section  521 1,  Rev. 
St.  ;  and,  therefore,  a  CMshi'.ir  who  made  ualh  before  such  notary 
to  a  false  .statement  of  the  condition  of  his  bank  was  not  guilty  of 
perjurj'.     (U.  S.  V.  Curtis,  107  U.  S.,  671.)     [See  also  Supplement.] 

Indictment — Form  of — Allegations  in. — An  indictment  for  a 
misapplication  of  the  funds  of  a  National  bank  must  specify  the 
particulars  of  the  application,  so  as  to  show  the  application 
charged  to  be  a  criminal  misapplication  as  distinguished  from 
applications  that  are  unlawful,  but  not  criminal.  (United  States 
V.  Eno,  56  Fed.  Rep.,  218;  United  States  v.  Warner,  26  Fed.  Rep., 
616;  Batchelor  v.  United  States,  156  U.  S.,  426.)  Hence  an  alle- 
gation that  the  defendant,  for  the  use,  benefit,  and  advantage  of 
himself,  misapplied  certain  moneys  of  the  bank  by  paying  them  to 
A  &  Co.,  is  not  sufficient;  for  it  does  not  show  that  such  pay- 
ment was  criminal ;  but  the  facts  showing  that  the  payment 
to  A  was  not  only  unlawful,  but  a  criminal  application  of  the 
money,  should  be  stated.  (United  States  v.  Eno.,  supra.)  But  if 
the  indictment  describes  specifically  the  funds  misapplied,  and  the 
manner  of  the  misapplication,  it  need  not  negative  ever>'  possible 
theory  consistent  with  an  honest  purpose  in  the  disposition  of  the 
funds  specified.  { Evans  ?'-  United  States,  153  U.  S.,  608.)  And 
an  indictment  for  aiding  and  abetting  an  officer  in  misapplying  the 
funds  of  the  bank  and  making  false  entries  in  its  books  need  not 
specifically  set  out  the  act  or  acts  by  which  the  aiding  and  abet- 
ting were  consummated.  (Coffin  v^  United  States,  162  U.  S.,  664.) 
In  an  indictment  for  willful  misapplication  of  the  funds  of  the  bank 
it  is  not  necessary  to  charge  that  the  funds  had  been  previously 
intrusted  to  defendant,  since  such  act  may  be  done  by  an  officer 
or  agent  of  the  bank  without  his  having  previously  received  the 
funds  into  his  manual  possession.  (United  States  v.  Northway, 
129  U.  S.,  327.) 

An  indictment  for  making  a  false  entry  in  a  report  to  the  Comp- 
troller need  not  allege  that  such  report  was  made  by  the  banking 
association,  or  that  it  was  actually  verified  by  the  oath  or  affirma- 


154 

tion  of  the  president  or  cashier,  or  attested  by  the  directors,  as 
required  by  Section  521 1;  but  it  is  sufficient  to  aver  that  the 
defendant  made  such  false  entry  in  a  certain  report  of  the  condition 
of  the  bank,  .  .  .  made  to  the  Comptroller  of  the  Currency  in 
accordance  with  the  provisions  of  Section  521 1.  (Cochran  v. 
United  States,  157  U.  S.,  286.)  And  it  is  sufficient  if  the  indict- 
ment allege  the  substance  of  the  reports  in  question  without  set- 
ting them  out  in  full.  (United  States  v.  French,  57  Fed.  Rep., 
382.)  It  is  not  necessary  to  allege  specifically  that  the  reports 
were  transmitted  to  the  Comptroller  of  the  Currency,  or  that  they 
were  published.     (United  States  v.  Potter,  56  Fed.  Rep.,  83. j 

Embezzlement,  abstraction,  and  willful  misapplication  of  the 
moneys,  funds,  etc. ,  of  a  National  bank,  as  described  in  this  sec- 
tion, constitute  three  separate  crimes  or  offenses,  which,  under 
Rev.  St.,  Sec.  1024,  may  be  joined  in  one  indictment,  but  must  be 
stated  in  separate  accounts.  (United  States  v.  Cadwallader,  59 
Fed.  Rep.,  677.) 

But  an  averment  in  an  indictment  against  an  officer  and  agent 
of  a  National  bank  that  defendant  "did  steal,  abstract,  take  and 
carry  away"  property  of  the  association,  does  not  charge  two 
offences.     (United  States  v.  Jewett,  84  Fed,  Rep.,  142.) 

And  an  indictment  charging  embezzlement  and  abstraction  of 
the  property  of  a  National  bank  is  not  demurrable  because  it  charges 
the  receipt  of  property  by  the  defendant  in  different  capacities,  both 
as  an  officer  and  as  an  agent  of  the  bank.     (/''/•) 

An  allegation  that  defendant,  an  officer  and  agent  of  a  National 
banking  association,  did  secretly,  in  a  manner  and  by  particulars 
to  the  jurors  luiknown,  willfully,  unlawfully  and  fraudulently  con- 
vert to  his  own  use,  and  misapply,  from  said  association  to  himself, 
certain  funds,  sufficiently  charges  the  offence  of  "willful  mis- 
application" of  property,  under  this  section.  (United  States  v. 
Jewett,  84  Fed.  Rep.,  142.) 

Criminal  Certification  of  Check. — To  constitute  a  criminal 
certification  of  a  check  by  an  officer  of  a  National  bank,  it  is  not 
necessary  that  he  should  himself  deliver  the  check  to  some  person 
outside  of  the  bank,  or  that  he  should  take  any  part  in  such 
delivery ;  but  the  offence  would  be  complete,  if  after  he  had  writ- 
ten the  words  of  certification,  the  actual  delivery  is  made  by  some 
clerk  or  other  officer  of  the  bank  without  his  knowledge.  (Potter 
V.  United  States,  U.  S.)     To  constitute  the  offence  the  certification 


•55 

nmst  have  been  "willful."  {Id.)  Where  there  is  evidence  tend- 
ing to  show  a  positive  agreement  on  the  part  of  the  officers  of  the 
bank  that  the  overdraft  caused  by  such  certified  check  should  be 
practically  treated  as  a  loan  from  day  to  day,  secured  by  ample 
collateral,  and  that  before  such  certified  check  issued  there  was 
deposited  in  advance  an  ample  amount  of  cash,  such  evidence 
must  be  submitted  to  the  jury,  on  the  question  of  criminal  intent. 
{Id,) 

Agent  in  Liquidation. — This  section  applies  to  an  agent  in 
liquidation  appointed  by  the  stockholders.  (United  States  v.  Jewett, 
84  Fed.  Rep.,  142.) 

S38.     Obligations  of  the  United  States  Defined. 

Section  5413. — The  words  "obligation  or  other  security  of  the  United 
States"  shall  be  held  to  mean  all  bonds,  certificates  of  indebtedness,  National 
bank  currency,  coupons,  United  States  notes,  Treasury  notes,  fractional  notes, 
certificates  of  deposit,  bills,  checks  or  drafts  for  money,  drawn  by  or  upon 
authorized  officers  of  the  United  States,  stamps  and  other  representatives  of 
value,  of  whatever  denomination,  which  have  been  or  may  [be]  issued  under 
any  act  of  Congress. 

See  Act  of  February  18,  1S75. 

139.    PenaBty  for  Counterfeiting  National  Bank  Notes, 

Section  5415. — Every  person  who  falsely  makes,  forges,  or  counterfeits,  or 
causes  or  procures  to  be  made,  forged  or  counterfeited,  or  willingly  aids  or 
assists  in  falsely  making,  forging  or  counterfeiting,  any  note  in  imitation  of 
or  purporting  to  be  in  imitation  of  the  circulating  notes  issued  by  any  bank- 
ing association  now  or  hereafter  authorized  and  acting  under  the  laws  of  the 
United  States ;  or  who  passes,  utters,  or  publishes,  or  attempts  to  pass,  utter, 
or  publish,  any  false,  forged,  or  counterfeited  note,  purporting  to  be  issued  by 
any  such  association  doing  a  banking  business,  knovi'ing  the  same  to  be 
falsely  made,  forged,  or  counterfeited,  or  who  falsely  alters,  or  causes  or  pro- 
cures to  be  falsely  altered,  or  willingly  aids  or  assists  in  falsely  altering  any 
such  circulating  notes,  or  passes,  utters,  or  publishes,  or  attempts  to  pass, 
utter,  or  publish  as  true,  any  falsely  altered  or  spurious  circulating  note 
issued,  or  puporting  to  have  been  issued,  by  any  such  banking  association, 
knowing  the  same  to  be  falsely  altered  or  spurious,  shall  be  imprisoned  at 
hard  labor  not  less  than  five  years  nor  more  than  fifteen  years,  and  fined 
not  more  than  one  thousand  dollars. 

140.    Penalty  for  using  Plates,  False  Plates,  Notes,  etc. 

Section  5430. — Every  person  having  control,  custody,  or  possession  of 
any  plate,  or  any  part  thereof,  from  which  has  been  printed,  or  which  may 


156 

be  prepared  by  direction  of  the  Secretary  of  the  Treasury  for  the  purpose  of 
printing,  any  obligation  or  other  security  of  the  United  States,  who  uses  such 
plate,  or  knowingly  suffers  the  same  to  be  used  for  the  purpose  of  printing 
any  such  or  similar  obligation,  or  other  security,  or  any  part  thereof,  except 
as  may  be  printed  for  the  use  of  the  United  States  by  order  of  the  proper 
officer  thereof;  and  every  person  who  engraves,  or  causes  or  procures  to  be 
engraved,  or  assists  in  engraving,  any  plate  in  the  likeness  of  any  plate 
designed  for  the  printing  of  such  obligation  or  other  security,  or  who  sells 
any  such  plate,  or  who  brings  into  the  United  States  from  any  foreign  place 
any  such  plate,  except  under  the  direction  of  the  Secretary  of  the  Treasury  or 
other  proper  officer,  or  with  any  other  intent,  in  either  case,  than  that  such 
plate  be  used  for  the  printing  of  the  obligations  or  other  securities  of  the 
United  States ;  or  who  has  in  his  control,  custody,  or  possession  any  metallic 
plate  engraved  after  the  similitude  of  any  plate  from  which  any  such  obliga- 
tion or  other  security  has  been  printed,  with  intent  to  use  such  plate,  or  suffer 
the  same  to  be  used  in  forging  or  counterfeiting  any  such  obligation  or  other 
security,  or  any  part  thereof;  or  who  has  in  his  possession  or  custody,  except 
under  authority  from  the  Secretary  of  the  Treasury  or  other  proper  officer, 
any  obligation  or  other  security,  engraved  and  printed  after  the  similitude  of 
any  obligation  or  other  security  issued  under  the  authority  of  the  United 
States,  with  intent  to  sell  or  otherwise  use  the  same ;  and  every  person  who 
prints,  photographs,  or  in  any  other  manner  makes  or  executes,  or  causes  to 
be  printed,  photographed,  made  or  executed,  or  aids  in  printing,  photograph- 
ing, making,  or  executing  any  engraving,  photograph,  print,  or  impression  in 
the  likeness  of  any  such  obligation  or  other  security,  or  any  part  thereof,  or 
who  sells  any  such  engraving,  photograph,  print,  or  impression,  except  to  the 
United  States,  or  who  brings  into  the  United  States  from  any  foreign  place 
any  such  engraving,  photograph,  print,  or  impression,  except  by  direction  of 
some  proper  officer  of  the  United  States,  or  who  has  or  retains  in  his  control 
or  possession,  after  a  distinctive  paper  has  been  adopted  by  the  Secretary  of 
the  Treasury  for  the  obligations  and  other  securities  of  the  United  States,  any 
similar  paper  adapted  to  the  making  of  any  such  obligation  or  other  security, 
except  under  the  authority  of  the  Secretary  of  the  Treasury  or  some  other 
proper  officer  of  the  United  States,  shall  be  punished  by  a  fine  of  not  more 
than  five  thousand  dollars,  or  by  imprisonment  at  hard  labor  not  more  than 
fifteen  years,  or  by  both. 

141.    PenaJty  fcr  Passhig,  SeJling,  etc.,  Counterfeits. 

Section  5431. — Every  person  who,  with  intent  to  defraud,  passes,  utters, 
publishes,  or  sells,  or  attempts  to  pass,  utter,  publish,  or  sell,  or  brings  into 
the  United  States  with  intent  to  pass,  publish,  utter,  or  sell,  or  keeps  in  pos- 
session or  conceals  with  like  .intent  any  falsely  made,  forged,  counterfeited, 
or  altered  obligation,  or  other  security  of  the  United  States,  shall  be  punished 
by  a  fine  of  not  more  th  xn  five  thousand  dollars,  and  by  imprisonment  at 
hard  labor  not  more  than  fifteen  years. 


'57 

■43.    lr>enalty  for  Taking  Impressions  of  Implements,  etc. 

Section  5432. — Every  person  who,  without  authority  from  the  United 
States,  takes,  procures,  or  makes,  upon  lead,  foil,  wax,  plaster,  paper,  or  any 
other  substance  or  material,  an  impression,  stamp,  or  imprint  of,  from,  or  by 
the  use  of  any  bed-plate,  bed-piece,  die,  roll,  plate,  seal,  type,  or  other  tool, 
implement,  instrument,  or  thing  used  or  fitted  or  intended  to  be  used,  in 
printing,  stamping,  or  impressing,  or  in  making  other  tools,  implements, 
instruments,  or  things,  to  be  used,  or  fitted  or  intended  to  be  used,  in  print- 
ing, stamping,  or  impressing  any  kind  or  description  oft  obligation  or  other 
security  of  the  United  States,  now  authorized  or  hereafter  to  be  authorized  by 
the  United  States,  or  circulating  note  or  evidence  of  debt  of  any  banking 
association  under  the  laws  thereof,  shall  be  punished  by  imprisonment  at 
hard  labor  not  more  than  ten  years,  or  by  a  fine  of  not  more  than  five 
thousand  dollars,  or  both.  /;• 

143.     Penalty  for  Having  Impressiions  of  Implements,  etc. 

Section  5433. — Every  person  who,  with  intent  to  defraud,  has  in  his  pos- 
session, keeping,  custody,  or  control,  without  authority  from  the  United 
States,  any  imprint,  stamp,  or  impression,  taken  or  made  upon  any  sub- 
stance or  material  v>hatsoever,  of  any  tool,  implement,  instrument,  or  thing, 
used  or  fitted  or  intended  to  he  used,  for  any  of  the  purposes  mentioned  in 
the  preceding  section  ;  or  who,  with  intent  to  defraud,  sells,  gives,  or  delivers 
any  such  imprint,  stamp,  or  impression  to  any  other  person,  shall  be  punished 
by  impiisonment  at  hard  labor  not  more  than  ten  years,  or  by  a  fine  of  not 
more  than  five  thousand  dollars. 

144.    Penalty  for  Buying  or  Selling  Counterfeits,  etc. 

Section  5434. — Every  person  who  buys,  sells,  exchanges,  transfers, 
receives,  or  delivers,  any  false,  forged,  counterfeited,  or  altered  obligation  or 
other  security  of  the  United  States,  or  circulating  note  of  any  banking  asso- 
ciation organized  or  acting  under  the  laws  thereof,  which  has  been  or  may 
hereafter  l)e  issued  by  virtue  of  any  act  of  Congress,  with  the  intent  that  the 
same  be  passed,  published,  or  used  as  true  and  genuine,  shall  be  imprisoned 
at  hard  labor  not  more  than  ten  years,  or  fined  not  more  than  five  thousand 
dollars,  or  both. 

145.    Penalty  for  Officers  Using  Notes,  etc.,  of  Closed  Banks. 

Section  5437. — In  all  cases  where  the  charter  of  any  corporation  which 
has  been  or  may  be  created  by  act  of  Congress  has  expired  or  may  hereafter 
expire,  if  any  director,  officer,  or  agent  of  the  corporation,  or  any  trustee 
thereof,  or  any  agent  of  such  trustee,  or  any  person  having  in  his  possession 
or  under  his  control  the  property  of  the  corporation  for  the  purpose  of  paying 
or  redeeming  its  notes  and  obligations,  knowingly  issues,  reissues,  or  utters  as 
money,  or  in  any  other  way  knowingly  puts  in  circulation  any  bill,  note. 


158 

check,  draft,  or  other  security  purporting  to  have  been  made  by  any  such 
corporation  whose  charter  has  expired,  or  by  any  officer  thereof,  or  purport- 
ing to  have  been  made  under  authority  derived  therefrom,  or  if  any  person 
knowingly  aids  in  any  such  act,  he  shall  be  punished  by  a  fine  of  not  more 
than  ten  thousand  dollars,  or  by  imprisonment  not  less  than  one  year  nor 
more  than  five  years,  or  by  both  such  fine  and  imprisonment.  But  nothing 
herein  shall  be  construed  to  make  it  unlawful  for  any  person,  not  being  such 
director,  officer,  or  agent  of  the  corporation,  or  any  trustee  thereof,  or  any 
agent  of  such  trustee,  or  any  person  having  in  his  possession  or  under  his 
control  the  property  of  the  corporation  for  the  purpose  hereinbefore  set  forth, 
who  has  received  or  may  hereafter  receive  such  bill,  note,  check,  draft,  or 
other  security,  bona  fide  and  in  the  ordinary  transactions  of  business,  to  utter 
as  money  or  otherwise  circulate  the  same. 

This  section  was  an  act  originally  passed  in  1837  to  apply  to 
the  second  Bank  of  the  United  States,  the  charter  of  which  had 
then  just  expired.  For  some  reason  or  other  the  compilers  em- 
bodied this  old  act  in  the  Revised  Statutes. 

146.    Receiving  Public  Moneys  Unless  Depositary ;  Penalty. 

Section  5497. — Every  banker,  broker,  or  other  person  not  an  authorized 
depositary  of  public  moneys,  who  knowingly  receives  from  any  disbursing 
officer,  or  collector  of  internal  revenue,  or  other  agent  of  the  United  States, 
any  public  money  on  deposit,  or  by  way  of  loan  or  accommodation,  with  or 
without  interest,  or  otherwise  than  in  payment  of  a  debt  against  the  United 
States,  or  who  uses,  transfers,  converts,  appropriates,  or  applies  any  portion 
of  the  public  money  for  any  purpose  not  prescribed  by  law,  and  every  presi- 
dent, cashier,  teller,  director,  or  other  officer  of  any  bank  or  banking  asso- 
ciation, who  violates  any  of  the  provisions  of  this  section,  is  guilty  of  an  act 
of  embezzlement  of  the  public  money  so  deposited,  loaned,  transferred,  used, 
converted,  appropriated,  or  applied,  and  shall  be  punished  as  prescribed  in 
section  fifty-four  hundred  and  eighty-eight. 

See  Sections  3639  and  3651  of  U.  S.  Revised  Statutes. 

It  will  be  seen  from  this  section  that  all  banks  other  than  public 
depositaries  are  put  on  notice  in  regard  to  dealings  with  disburs- 
ing officers,  etc.,  of  the  United  States.  If  the  provisions  of  this 
section  are  violated,  such  violation  constitutes  embezzlement. 
Sections  3639  and  3651  of  the  Revised  Statutes  are  also  of  import- 
ance to  bankers.     They  have  reference  to  public  moneys. 


CHAPTER  VIII. 


suns,  JURISDICTION,  AND  EVIDENCE. 


147.  Jurisdiction  of  District  Courts. 

Section  563. — The  District  Courts  shall  have  jurisdiction  as  follows: 

Fifteenth.  Of  all  suits  by  or  against  any  association  estabhshed  under  any 
law  providing  for  National  banking  associations  within  the  district  for  which 
the  court  is  held. 

See  note,  next  section. 

148.  Jurisdiction  of  Circuit  Courts. 

Section  629. — The  Circuit  Courts  shall  have  original  jurisdiction  as  follows : 
*  *  *  *  *  *  '    ♦ 

Tenth.  Of  all  suits  by  or  against  any  banking  association  established  in 
the  district  for  which  the  court  is  held,  under  any  law  providing  for  National 
banking  associations. 

Eleventh.  Of  all  suits  brought  by  any  banking  association  established  in 
the  district  for  which  the  court  is  held,  under  the  provisions  of  Title  "The 
National  Banks,"  to  enjoin  the  Comptroller  of  the  Currency,  or  any  receiver 
acting  under  his  direction,  as  provided  by  said  Title. 

The  jurisdiction  of  the  Federal  courts  in  suits  to  which  National 
banks  are  parties  is  now  defined  by  Section  4  of  the  act  of  August 
13,  1888  (see  page  187),  which  made  very  material  changes  in  the 
law,  and  which  placed  National  banks  in  respect  to  their  rights  to 
sue  and  be  sued  in  the  United  States  courts  on  the  same  footing  as 
corporations  organized  under  State  laws.  But  the  section  referred 
to  was  practically  only  a  re-enactment  of  the  proviso  to  Section  4 
of  the  act  of  July  12,  1882.  (See  page  178.)  But  neither  of  these 
enactments  affect  the  jurisdiction  of  the  Federal  courts  in  cases  to 
which  the  United  States  or  its  officers  are  parties,  or  in  cases  for 
winding  up  the  affairs  of  insolvent  banks.  (Witters  ?'.  Foster,  28 
Fed.  Rep.,  737;  Hendee  v.  Connecticut,  etc.,  R.  R.  Co..  26  Fed. 
Rep.,  677  ;  Armstrong  t/.Ettlesohn,  36  Fed.  Rep.,  209;  Armstrong 

159 


i6o 

V.  Troutman,  36  Fed.  Rep.,  275;  McConviile  v.  Gilmour,  36  Fed. 
Rep.,  277 ;  Fisher  v.  Yoder,  53  Fed.  Rep.,  565,) 

149.    Exclusive  Jurisdiction  of  United  States  Courts  in  Suits  for 

Penalties,  etc. 

Section  711. — The  jurisdiction  vested  in  the  courts  of  the  United  States, 
in  the  cases  and  proceedings  hereinafter  mentioned,  shall  be  exclusive  of  the 
courts  of  the  several  States. 

Second.  Of  all  suits  for  penalties  and  forfeitures  incurred  under  the  laws 
of  the  United  States. 

*****#♦ 

ISO.    In  what  Courts  Suits  may  be  Brought. 

Section  5198.-  *  Suits,  actions,  and  proceedings  against  any  association 
under  this  title  may  be  had  in  any  circuit,  district,  or  territorial  court  of  the 
United  States  held  within  the  district  iii  which  such  association  may  be  estab- 
lished, or  in  any  State,  county,  or  municipal  court  in  the  county  or  city  in 
which  said  association  is  located,  having  jurisdiction  in  similar  cases. 

The  -acts  of  1864  and  1875,  authorizing  certain  State  courts 
to  take  cognizance  of  suits,  actions,  and  proceedings  against  Na- 
tional banks,  had  the  effect,  so  far  as  suits  for  penalties  incurred 
under  the  laws  of  the  United  States  were  concerned,  to  modify  the 
provi.sion  in  prior  enactments  that  expressly  excluded  suits  for 
such  penalties  from  the  cognizance  of  State  courts.  (First  Na- 
tional Bank  of  Charlotte  7'.  Morgan,  U.  S.,  141.)  The  exemption 
of  National  banks  from  suits  in  State  courts,  established  elsewhere 
than  in  the  county  or  city  in  which  the  bank  was  located,  was  a 
personal  privilege  which  the  bank  could  waive,  and  which  was 
waived  when  the  bank  appeared  and  defended  without  claiming 
the  immunity.  (First  National  Bank  of  Charlotte  v.  Morgan,  Id.) 
And  the  provision  requiring  the  action  to  be  brought  in  the  county 
or  city  where  the  bank  is  located  applies  only  to  transitor>'  actions, 
and  not  to  actions  local  in  their  character.  (Casey  v.  Adams,  102 
U.  S.,  96.  See  Cadle  v.  Tracy,  11  Blatch.,  loi  ;  Talmagez/.  Third 
National  Bank,  27  Hun.,  61.)  For  jurisdictional  purposes,  a  Na- 
tional bank  is  a  citizen  of  the  State  in  which  it  is  located.  (Davis 
7'. Cook,  9  Mo.,  134.) 

The  State  courts  have  jurisdiction  of  an  action  brought  by  a 
shareholder  on  behalf  of  himself  and  other  .shareholders  to  recover 
of  the  directors  of  an  insolvent  National  bank  damages  for  inju- 


i6i 

ries  resulting  from  their  negligence  and  misconduct.     (Brincker- 
hoff  z/.  Bostwick,  88  N.  Y.,  52.) 

And  State  courts  have  jurisdiction  of  actions  against  National 
banks  to  recover  the  penalty  prescribed  by  Congress  for  taking 
usurious  interest,  (Schuyler  v.  BuUong,  28  Neb.,  684;  Henderson 
National  Bank  v-  Alves,  91  Ky.,  142;  Ordway  v.  Central  National 
Bank,  47  Md.,  217;  Bletz  v.  Columbia  National  Bank,  87  Pa.  .St., 
87;  Hade  v.  McVey,  31  Ohio  St.,  231.)  But  they  have  no  juris- 
diction in  criminal  cases  arising  under  the  National-Bank  Act. 
(/«  re  Euo,  54  Fed.  Rep.,  669;  Commonwealth  v.  Felton,  loi 
Mass.,  204;  Commonwealth  ex  rel.  v.  Ketner,  92  Pa.  St.,  372.) 

A  State  court  has  no  power  to  make  an  order  directing  the  re- 
ceiver of  a  National  bank  who  has  been  appointed  by  the  Comp- 
troller of  the  Currency  to  pay  a  judgment  obtained  against  the 
bank  before  the  receiver  was  appointed.  (Ocean  National  Bank 
V.  Carll,  7  Hun.,  237.) 

The  State  statute  of  limitations  applies  to  a  suit  brought  by  the 
receiver  of  a  National  bank  against  a  shareholder  to  recover  an 
assessment  upon  his  stock  to  pay  the  debts  of  the  bank.     (Butler 
V.  Poole,  44  Fed.  Rep.,  586.)     [See  also  Supplement.] 

151.    No  Attachment  before  Final  Judgment  in  State  Court. 

Section  5242.* — No  attachment,  injunction,  or  execution  shall  be  issued 
against  such  association  or  its  property  before  final  judgment  in  any  suit, 
action  or  proceeding,  in  any  State,  county,  or  municipal  court. 

Attachments. — In  the  case  of  Pacific  National  Bank  v.  Mixter, 
(124  U.  S.,  721)  the  Supreme  Court  of  the  United  States  said  that 
although  this  provision  forbidding  attachments  was  evidently 
made  to  secure  equality  among  the  general  creditors  in  the  divi- 
sion of  the  proceeds  of  the  property  of  an  insolvent  bank,  its 
operation  is  by  no  means  confined  to  cases  of  actual  or  contem- 
plated insolvency ;  but  the  remedy  is  taken  away  altogether,  and 
can  not  be  resorted  to  under  any  circumstances.  The  efiect  of  this 
provision  is  to  write  into  all  State  attachment  laws  an  exception 
in  favor  of  National  banks,  and  all  such  laws  must  be  read  as  if 
they  contained  an  exception  in  favor  of  National  banks.  And,  as 
all  power  of  issuing  attachments  against  National  banks  has  been 
eliminated  from  State  statutes,  there  can  be  no  laws  of  the  State 


*For  parts  of  sections  5198  and  5242,  see  also  par.  76, 119. 
11 


1 62 

providing  for  such  a  remedy  under  which  the  Circuit  Courts  of 
the  United  States  can  act,  and,  therefore,  these  courts,  as  well  as 
the  State  courts,  have  no  power  to  grant  an  attachment.  {Id.) 
As  the  attachment  is  void,  a  bond  given  by  a  National  bank  to 
dissolve  such  attachment,  served  by  summons  of  garnishment,  is 
also  void.  (Planters'  L.  &  S.  Bank  z^.  Berr>^  92  Ga.,  264.)  Nor  is 
the  giving  of  such  bond  an  appearance  in  the  attachment  case  so 
as  to  make  valid  a  judgment  entered  on  the  bond  in  that  case 
against  the  bank  and  the  sureties  executing  the  bond.  (/^.) 
Sureties  who  have  received  assets  of  the  bank  to  secure  them  from 
loss  thereon,  the  obligation  being  illegal,  will  be  discharged  in 
equity  and  be  compelled  to  transfer  their  collateral  to  the  receiver 
of  the  bank.  (Pacific  National  Bank  v.  Mixter,  124  U.  S.,  721.) 
Where  service  is  made  on  a  National  bank  only  by  attachment 
and  publication  or  service  out  of  the  State,  the  attachment  being 
prohibited  by  this  section  will  be  vacated  and  the  service  set  aside. 
(Garner  v.  Second  National  Bank,  66  Fed.  Rep.,  369.)  And  a  re- 
ceiver of  a  National  bank  situated  in  another  State,  though  not  a 
party,  may  move  to  vacate  an  attachment.  (People's  Bank  of  the 
City  of  New  York  v.  Mechanics'  National  Bank  of  Newark,  62 
How.  Pr. ,  422.)  The  provision  of  this  section  prohibiting  attach- 
ments is  not  repealed  by  the  Act  of  Congress  of  July  12,  1882, 
providing  that  the  jurisdiction  for  suits  thereafter  brought  against 
National  banks  shall  be  the  same  as  for  suits  against  State  banks, 
and  repealing  laws  inconsistent  therewith.  (Raynor  v.  Pacific  Na- 
tional Bank,  93  N.  Y.,  371.)      [See  also  Supplement.] 

Injunctions. — This  section  forbids  State  courts  to  grant  injunc- 
tions against  National  banks  before  final  judgment ;  and  the  pro- 
hibition is  not  repealed  by  Stat.  U.  S.  1882,  C.  290,  §  4,  or  Stat. 
U.  S.  1887,  C.  373,  §  4,  or  Stat.  U.  S.  1888,  C.  866,  §  4.  (Free- 
man Manufacturing  Company  v.  National  Bank  of  the  Republic, 
160  Mass.,  398.)  But  this  section  does  not  deprive  the  Federal 
courts  of  the  power  to  issue  such  an  injunction.  (Hoover  v.  Weiss 
Malting  and  Elevator  Co.,  55  Fed.  Rep.,  356.)  And  where  the 
case  is  removed  into  the  Federal  court  after  an  injunction  granted 
by  the  State  court,  the  Federal  court  may  continue  such  injunc- 
tion, {li.)  When  a  valid  judgment  has  been  obtained  in  a  State 
court  against  a  National  bank,  and  the  lien  thereof  has  attached 
to  its  property,  before  the  appointment  of  a  Receiver,  this  section 
applies  to  prohibit  the  issue  of  an  injunction  by  a  Federal  court, 


1 63 

at  the  suit  of  the  Receiver,  to  restrain  the  enforcement  of  such 
judgment.     (Baker  z\  Ault,  78  Fed.  Rep.,  374.) 

152.    Proceedings  to  Enjoin  Comptroller,  wliere  had. 

Section  736. — All  proceedings  by  any  National  banking  association  to 
enjoin  the  Comptroller  of  the  Currency,  under  the  provisions  of  any  law 
relating  to  National  banking  associations,  shall  be  had  in  the  district  where 
such  association  is  located. 

See  Section  5237,  par.  rt6. 

153.    United  States  District  Attorney  to  Conduct  Suits. 

Section  380. — All  suits  and  proceedings  arising  out  of  the  provisions  of 
law  governing  National  banking  associations,  in  which  the  United  States 
or  any  of  its  officers  or  agents  shall  be  parties,  shall  be  conducted  by  the 
district  attorneys  of  the  several  districts  under  the  direction  and  supervision 
of  the  Solicitor  of  the  Treasury. 

154.     Instruments  Certified  by  Comptroller  May   be  Evidence. 

Section  884. — Every  certificate,  assignment,  and  conveyance  executed  by 
the  Comptroller  of  the  Currency,  in  pursuance  of  law,  and  sealed  with  his 
seal  of  office,  shall  be  received  in  evidence  in  all  places  and  courts ;  and  all 
copies  of  papers  in  his  office,  certified  by  him  and  authenticated  by  the  said 
seal,  shall  in  all  cases  be  evidence  equally  with  the  originals.  An  impres- 
sion of  such  seal  directly  on  the  paper  shall  be  as  valid  as  if  made  on  wax  or 
wafer. 

[See  Supplement.] 

Certified  copies  of  papers  are  usually  furnished  by  the  Comp- 
troller's office  upon  affidavit  setting  forth  what  they  are  required 
for,  and  that  the  evidence  can  be  procured  in  no  other  way,  pro- 
vided the  parties  requesting  are  entitled  to  receive  them,  and  if  the 
giving  of  the  copies  would  not  be  detrimental  to  the  public  service. 

155'     Certified  Copies  of   Organization  Certificate  Evidence. 

Section  885. — Copies  of  the  organization  certificate  of  any  National  bank- 
ing association,  duly  certified  by  the  Comptroller  of  the  Currency,  and 
authenticated  by  his  seal  of  office,  shall  be  evidence  in  all  courts  and  places 
within  the  jurisdiction  of  the  United  States  of  the  existence  of  the  association, 
and  of  every  matter  which  could  be  proved  by  the  production  of  the  origin;il 
certificate. 

Effect  of  Certificate  as  Evidence. — This  certificate,  together 
with  proof  that  the  bank  has  been  acting  as  a  National  bank  for  a 
long  time,  is  amply  sufficient  evidence  to  establish,  at  least  prima 


164 

facie,  the  existence  of  the  corporation.  (Mix  v.  National  Bank 
of  Bloomington,  91  111.,  20.)  See  also  Thatcher  v.  West  River 
National  Bank,  19  Mich.,  196;  Merchants'  National  Bank  v.  Glen- 
don,  120  Mass.,  97.)  And  such  certificate  is  competent  evidence 
in  a  State  court.  (Tapley  v.  Martin,  116  Mass.,  275.)  In  a  suit 
against  the  bank  or  its  stockholders  this  certificate  is  conclusive 
evidence  of  the  organization.     (Casey  v.  Galli,  94  U.  S.,  673.) 

Certificate  of  Deputy  Comptroller. — Where  the  certificate  is 
signed  by  the  Deputy  Comptroller,  the  court  will  assume  that  at 
the  date  of  such  certificate  he  was  authorized  to  exercise  the  power 
and  discharge  the  duties  of  Comptroller.  (Ke5^ser  v.  Hitz,  133  U. 
S.,  438.)  And  it  is  no  objection  that  it  is  signed  by  him  as  Acting 
Comptroller.     (M)     (Aspiuwall  v.  Butler,  133  U.  S.,  595.) 

Proof  by  Other  Evidence — In  an  action  by  a  National  bank 
it  is  competent  to  prove  by  parol  that  it  was  carrying  on  a  general 
banking  business  as  a  National  bank  authorized  by  the  general 
laws  of  the  United  States  under  the  name  by  which  it  had  sued. 
(Yakima  National  Bank  v.  Kuipe,  6  Wash.,  348.) 


CHAPTER    IX. 


AMENDMENTS  AND  ADDITIONAL  ACTS. 


156.    "The  National-Bank  Act." 

An  Act  Approved  June  20,  1874. 

Section  i. — That  the  act  entitled  "  An  act  to  provide  a  National  cur- 
rency secured  by  a  pledge  of  United  States  bonds,  and  to  provide  for  tha 
circulation  and  redemplioa  thereof,'"  approved  June  third,  eighteen  hundred 
and  sixty-four,  shall  hereafter  be  known  as  the  "  National-Bank  Act." 

157.    Lawful  Money  Reserve  on  Circulation  Abolished. 

Section  2. — That  section  thirty-one  of  the  "  National  Bank  Act  "  be  so 
amended  that  the  several  associations  therein  provided  for  shall  not  hereafter 
be  required  to  keep  on  hand  any  amount  of  money  whatever  by  reason  of 
the  amount  of  their  respective  circulations ;  but  the  moneys  required  by  said 
secdon  to  be  kept  at  all  times  on  hand  shall  be  determined  by  the  amount  of 
deposits  in  all  respects,  as  provided  for  in  the  said  section. 

See  Section  5 191,  par.  69. 

158.    Redemption  Fund ;  Redemption  of  Notes,  &c. 

Section  3. — That  every  association  organized,  or  to  be  organized,  under 
the  provisions  of  the  said  act,  and  of  the  several  acts  amendatory  thereof, 
shall  at  all  times  keep  and  have  on  deposit  in  the  Treasury  of  the  United 
States,  in  lawful  money  of  the  United  States,  a  sum  equal  to  five  per  centum 
of  its  circulation,  to  be  held  and  used  for  the  redemption  of  such  circulation, 
which  sum  shall  be  counted  as  a  part  of  its  lawful  reserve,  as  provided  in  sec- 
tion two  of  this  act;  and  when  the  circulating  notes  of  any  such  associations, 
assorted  or  unassorted,  shall  be  presented  for  redemption,  in  sums  of  one 
thousand  dollars  or  any  multiple  thereof,  to  the  Treasurer  of  the  United 
States,  the  same  shall  be  redeemed  in  United  States  notes.  All  notes  so 
redeemed  shall  be  charged  by  the  Treasurer  of  the  United  States  to  the 
respective  associations  issuing  the  same,  and  he  shall  notify  them  severally  on 
the  first  day  of  each  month,  or  oftener,  at  his  discretion,  of  the  amount 
ot  such  redemptions;  and  whenever  such  redemptions  for  any  associ- 
ation shall  amount  to  the  sum  of  five  hundred  dollars,  such  association 
so  notified  shall  forthwith  deposit  with  the  Treasurer  of  the  United  State* 

165 


i66 

a  sum  in  United  States  notes  equal  to  the  amount  of  its  circulating 
notes  so  redeemed.  And  all  notes  of  National  banks,  worn,  defaced, 
mutilated, or  other  wise  unfit  for  circulation,  shall,  when  received  by  any 
Assistant  Treasurer,  or  at  any  designated  depository  of  the  United  States,  be 
forwarded  to  the  Treasurer  of  the  United  States  for  redemption,  as  provided 
herein.  And  when  such  redemptions  have  been  so  reimbursed,  the  circu- 
lating notes  so  redeemed  shall  be  forwarded  to  the  respective  associations 
by  which  they  were  issued ;  but  if  any  of  such  notes  are  worn,  mutilated, 
defaced,  or  rendered  otherwise  unfit  for  use,  they  shall  be  forwarded  to  the 
Comptroller  of  the  Currency  and  destroyed,  and  replaced  as  now  provided 
by  law:  Provided,  That  each  of  said  associations  shall  reimburse  to  the 
Treasury  the  charges  for  transportation  and  the  costs  for  assorting  such  notes,* 
and  the  associations  hereafter  organized  shall  also  severally  reimburse  to  the 
Treasury  the  cost  of  engraving  such  plates  as  shall  be  ordered  by  each  asso- 
ciation respectively,  and  the  amount  assessed  upon  each  association  shall  be 
in  proportion  to  the  circulation  redeemed,  and  be  charged  to  the  fund  on 
deposit  with  the  Treasurer:  And  provided  further.  That  so  much  of  section 
thirty-two  of  said  National  Bank  Act  requiring  or  permitting  the  redemption 
of  its  circulating  notes  elsewhere  than  at  its  own  counter,  except  as  provided 
for  in  this  section,  is  hereby  repealed,  f 

The  Five  Per  Cent.  Fund. — This  section  requires,  instead  of 
the  reserve  on  circtilation  abolished  by  the  preceding  section,  a 
deposit  equal  to  five  per  cent,  of  its  circulation  by  each  bank,  in 
lawful  money,  with  the  United  States  Treasurer  for  the  redemption 
of  its  circtilation.  The  deposit  so  made  may  be  counted  as  a  part 
of  the  bank's  lawful  money  reserve. 

Redemption  Regulations. — When  National  bank  notes  of  one 
or  more  associations  are  presented  in  lots  of  ^looo,  or  any  multiple 
thereof,  the  Treasurer  may  redeem  the  same.  The  Treasurer  has 
no  authorit)^  in  law  for  redeeming  a  lot  less  than  ^looo,  or  any  lot 
unless  it  is  in  even  thousands.  The  object  of  this  was  un- 
doubtedly to  avoid  a  multiplicity  of  accounts  with  the  outside 
public.  The  notes  are  charged  to  the  respective  associations 
issuing  them  until  the  notes  so  redeemed  for  and  charged  to  any 
one  association  amount  to  $500,  when  that  association  is  notified 
and  required  to  deposit  %  lawful  money  equal  to  the  amount  re- 
deemed. Theoretically  the  five  per  cent  redemption  fund  is  never 
touched.     It  remains  intact,  and  this  explains  why  it  can  con- 

*  See  Act  of  July  12th,  1882,  Sec.  8. 
fSee  Sections  5192,  5195,  and  5226, 
J  See  Decisions  of  Attorney  General. 


i67 

sistently  be  counled  as  a  part  of  the  lawful  money  reserve  of  a 
bank.  When  a  bank  first  makes  its  five  per  cent,  deposit,  it 
receives  a  credit  on  the  books  of  the  Treasury.  The  cash  goes  into 
the  general  fund  and  becomes  indistinguishably  mingled  there- 
with. 

The  Treasury  redeems  the  notes  as  they  appear  from  its  own 
funds,  and  in  the  contemplation  of  law  no  charge  is  made  to  the 
five-per-cent.  account  of  the  bank,  but  when  the  redemptions  made 
for  it  reach  $500,  then  it  is  notified  and  required  to  reimburse  the 
Treasury  for  the  sum  paid  on  its  behalf.  The  requirement  that 
National  bank  notes  unfit  for  circulation  shall  be  sent  in  by  the 
Assistant  Treasurers  and  designated  depositaries  of  the  United 
States  is  intended  to  keep  the  circulation  up  to  a  fair  standard  of 
newness  and  cleanliness.  Notes  redeemed  at  the  Treasury  fit  for 
circulation  are  sent  back  to  the  banks ;  unfit  notes  are  destroyed  as 
provided  in  Section  5184,  (which  see,  as  well  as  remarks  under 
Section  5232.) 

Payment  of  Expenses. — The  associations  are,  according  to 
the  amount  of  notes  redeemed  for  each,  lo  pay  all  the  expenses  of 
this  process  of  redemption,  such  expense  to  be  charged  to  the  five- 
per-cent.  account.  Prior  to  the  pa.ssage  of  this  section  the  expense 
of  the  plates  and  all  expense  of  preparing  the  notes  of  National 
banks  were  paid  out  of  the  proceeds  of  the  tax  on  circulation  ;  but 
plates  ordered  after  the  date  of  this  section  are  to  be  paid  for  by 
the  banks  themselves.  (See  Section  5173,  and  also  Section  8,  Act 
of  July  12th,  1882.)  Banks  are  not  relieved  from  redeeming  their 
own  notes  at  their  own  counters.  (See  remarks  under  Section 
5227,  par.  1 06.)  The  detailed  regulations  governing  the  redemp- 
tion of  National  bank  notes  will  be  found  on  page  275.  (See  Act 
July   14,  1892,  post.^ 

159.     Retiring  Circulation  and  Withdrawing  Bonds. 

Section  4. — That  any  association  organized  under  this  act,  or  any  of  the 
acts  of  which  this  is  an  amendment,  desiring  to  withdraw  its  circulating  notes, 
in  whole  or  in  part,  may,  upon  the  deposit  of  lawful  money  with  the  Treasurer 
of  the  United  States  in  sums  of  not  less  than  nine  thousand  dollars,  take  up 
the  bonds  which  said  association  has  on  deposit  with  the  Treasurer  for  the 
security  of  such  circulating  notes,  which  bonds  shall  be  assigned  to  the  bank 
in  the  manner  specified  in  the  nineteenth  section  of  the  National  Bank  Act  ; 
and  the  outstanding  notes  of  said  association,  to  an  amount  equal  to  the 
legal-tender  notes  deposited,  shall  be  redeemed  at  the  Treasury  of  the  United 


i68 

States,  and  destroyed  as  now  provided  by  law :  Provided,  That  the  amount 
of  the  bonds  on  deposit  for  circulation  shall  not  be  reduced  below  fifty  thou- 
sand dollars. 

See  Section  5167,  par.  49. 

See  Act  of  July  12th,  1882,  Section  9,  par.  189. 

See  Sections  5159,  5160  and  5167,  par.  41,  42,  49. 

Prior  to  the  enactment  of  this  section  the  only  method  by  which 
National  banks  not  in  liquidation  could  withdraw  any  portion  of 
their  bonds  was  by  gathering  up  their  own  circulation,  and  sur- 
rendering the  same  for  cancellation  and  destruction  to  the  Comp- 
troller of  the  Currency.  (See  Section  5167,  page  69.)  This  section 
also  reduced  the  minimum  of  bonds  to  be  kept  from  an  amount 
equal  to  one-third  of  the  capital  stock,  and  not  less  than  $30,000 
to  $50,000  in  each  case.  (See  Sections  5159  and  5160,  par.  41,  42.) 
The  minimum  of  bonds  required  to  be  kept  on  deposit  by  National 
banks  is  in  certain  cases — banks  with  a  capital  of  $150,000  and  less 
— further  reduced  by  the  provisions  of  Section  8  of  the  Act  of  July 
i2th,  1882,  par,  188. 

160.    The  Charter  Number  of  Banks  to  be  on  Notes. 

Section  5. — That  the  Comptroller  of  the  Currency  shall,  under  such  rules 
and  regulitions  as  the  Secretary  of  the  Treasury  may  prescribe,  cause  the 
charter  numbers  of  the  association  to  be  printed  upon  all  National  bank 
notes  which  may  be  hereafter  issued  by  him. 

This  is  for  convenience  in  assorting  notes. 

161.    Amount  of  United  States  Notes  Allowed  for  Circulation. 

Section  6. — That  the  amount  of  United  States  notes  outstanding  and  to 
be  used  as  a  part  of  the  circulating  medium  shall  not  exceed  the  sum  of  three 
hundred  and  eighty-two  million  dollars,  which  said  sum  shall  appear  in  each 
monthly  statement  of  the  pubhc  debt,  and  no  part  thereof  shall  be  held  or 
used  as  a  reserve. 

162.    Relative  to  Withdrawal  of  $55,000,000  Circulation. 

Section  7. — That  so  much  of  the  act  entitled  "An  Act  to  provide  for  the 
redemption  of  the  three  per  cent,  temporary-loan  certificates,  and  for  an 
increase  of  National  bank  notes,"  as  provides  that  no  circulation  shall  be 
withdrawn  under  the  provisions  of  section  six  of  said  act,  until  after  the  fifty- 
four  millions  granted  in  section  one  of  said  act  shall  have  been  taken  up,  is 
hereby  repealed:  and  it  shall  be  the  duty  of  the  Comptroller  of  the  Currency, 
under  the  direction  of  the  Secretary  of  the  Treasury,  to  proceed  forthwith, 


i69 

and  he  is  hereby  authorized  and  required,  from  time  to  time,  as  applications 
shall  be  duly  made  therefor,  and  until  the  full  amount  of  filty-five  million 
dollars  shall  be  withdrawn,  to  make  requisitions  upon  each  of  the  Nationai 
banks  described  in  said  section,  and  in  the  manner  therein  provided,  organ- 
ized in  States  having  an  excess  of  circulation,  to  withdraw  and  return  so 
much  of  their  circulation  as  by  said  act  may  be  apportioned  to  be  withdrawn 
from  them,  or,  in  lieu  thereof,  to  deposit  in  the  Treasury  of  the  United  States 
lawful  money  sufficient  to  redeem  such  circulation;  and  upon  the  return  of 
the  circulation  required,  or  the  deposit  of  lawful  money,  as  herein  provided, 
a  proportionate  amount  of  the  bonds  held  to  secure  the  circulation  of  such 
association  as  shall  make  such  return  or  deposit  shall  be  surrendered  to  it. 

Obsolete.  Superseded  by  Act  of  January  14th,  1875,  Section  3, 
par.  168.     See  Section  5179,  Revised  Statutes. 

163.    Bonds  to  be  Sold  on  Failure  to  Return  Circulation. 

Section  8. — That  upon  the  failure  of  the  National  banks  upon  which 
requisition  for  circulation  shall  be  made,  or  of  any  of  them,  to  return  the 
amount  required,  or  to  deposit  in  the  Treasury  lawful  money  to  redeem  the 
circulation  required  within  thirty  days,  the  Comptroller  of  the  Currency  shall 
at  once  sell,  as  provided  in  section  forty-nine  of  the  National  Currency  Act, 
approved  June  third,  eighteen  hundred  and  sixty-four,  bonds  held  to  secure 
the  redemption  of  the  circulation  of  the  association  or  associations  which 
shall  so  fail,  to  an  amount  sufficient  to  redeem  the  circulation  required  of 
such  association  or  associations,  and  with  the  proceeds,  which  shall  be 
deposited  in  the  Treasury  of  the  United  States,  so  much  of  the  circulation 
of  such  association  or  associations  shall  be  redeemed  as  will  equal  the 
amount  required  and  not  returned ;  and  if  there  be  an  excess  of  proceeds 
over  the  amount  required  for  such  redemption,  it  shall  be  returned  to  the 
association  or  associations  whose  bonds  shall  have  been  sold.  And  it  shall 
be  the  duty  of  the  Treasurer,  Assistant  Treasurers,  designated  depositaries, 
and  National  bank  depositaries  of  the  United  States,  who  shall  be  kept 
informed  by  the  Comptroller  of  the  Currency  of  such  associations  as  shall 
fail  to  return  circulation  as  required,  to  assort  and  return  to  the  Treasury  for 
redemption  the  notes  of  such  associations  as  shall  come  into  their  hands 
until  the  amount  required  shall  be  redeemed,  and  in  like  manner  to  assort 
and  return  to  the  Treasury,  for  redemption,  the  notes  of  such  National  banks 
as  have  failed,  or  gone  into  voluntary  liquidation  for  the  purpose  of  winding 
up  their  affairs,  and  of  such  as  shall  hereafter  so  fail  or  go  into  liquidation. 

Obsolete.  Superseded  by  Act  of  January  14th,  1875,  Section  3, 
par.  168.     See  Revised  Statutes,  par.  no. 

164.    issue  of  New  Notes  for  $55,000,000  Withdrawn,  etc. 

Section  9. — That  from  and  after  the  passage  of  this  Act  it  shall  be  lawful 
for  the  Comptroller  of  the  Currency,  and  he  is  hereby  required,  to  issue  cir- 


I70 

culating  notes,  without  delay,  as  applications  therefor  are  made,  not  to 
exceed  the  sum  of  fifty-five  million  dollars,  to  associations  organized,  or  to 
be  organized,  in  those  States  and  Territories  having  less  than  their  proportion 
of  circulation,  under  an  apportionment  made  on  the  basis  of  population  and 
of  wealth,  as  shown  by  the  returns  of  the  census  of  eighteen  hundred  and 
seventy  ;  and  every  association  hereafter  organized  shall  be  subject  to,  and 
be  governed  by,  the  rules,  restrictions,  and  limitations,  and  possess  the  rights, 
privileges,  and  franchises,  now  or  hereafter  to  be  prescribed  by  law  as  to 
National  banking  associations,  with  the  same  power  to  amend,  alter,  and 
repeal  provided  by  the  "National  Bank  Act:''  Provided,  That  the  whole 
amount  of  circulation  withdrawn  and  redeemed  from  banks  transacting  busi- 
ness shall  not  exceed  fifty-five  million  dollars,  and  that  such  circulation  shall 
be  withdrawn  and  redeemed  as  it  shall  be  necessary  to  supply  the  circulation 
previously  issued  to  the  banks  in  those  States  having  less  than  their  appor- 
tionment: And  provided  further.  That  not  more  than  thirty  million  dollars 
shall  be.  withdrawn  and  redeemed  as  herein  contemplated  during  the  fiscal 
year  ending  June  thirtieth,  eighteen  hundred  and  seventy-five. 

Obsolete.     Superseded  by  Act  of  January  14th,  1875,  Section  3, 
par.  168. 

165.    Notes  to  be  Destroyed  by  Maceration. 

Extract  from  an  Act  Approved  June  23,  1874. 

For  the  maceration  of  National  bank  notes,  United  States  notes,  and  other 
obligations  of  the  United  States  authorized   to  be  destroyed,  ten  thousand 

dollars;  and  that  all  such  issues  hereafter  desti      ^j  uy,  ucstroved  by 

maceration  instead  of  burning  to  ashes,  as  now  provided  by  law  ;  and  that  so 
much  of  sections  twenty-four  and  forty-three  of  the  National  Currency  Act 
as  requires  National  bank  notes  to  be  burned  to  ashes  is  hereby  repealed. 

See  Sections  5184  and  5225,  pars.  63-104. 

i66.    Silver  Coins  to  Redeem  Fractional  Currency. 

An  Act  Approved  January  14,  1S75. 

That  the  Secretary  of  the  Treasury  is  hereby  authorized  and  required,  as 
rapidly  as  practicable,  to  cause  to  be  coined,  at  the  mints  of  the  United 
States,  silver  coins  of  the  denominations  of  ten,  twenty-five,  and  fifty  cents, 
of  standard  value,  and  to  issue  them  in  redemption  of  an  equal  number  and 
amount  of  fractional  currency  of  similar  denominations,  or,  at  his  discretion, 
he  may  issue  such  silver  coins  through  the  mints,  the  subtreasuries,  public 
depositaries,  and  post-offices  of  the  United  States ;  and,  upon  such  issue,  he 
is  hereby  authorized  and  required  to  redeem  an  equal  amount  of  such  frac- 
tional currency,  until  the  whole  amount  of  such  fractional  currency  out- 
standing shall  be  redeemed. 


171 


167.    Charge  for  Coining  Qold  Bullion  Repealed. 

Section  2. — That  so  much  of  section  three  thousand  five  liundred  and 
twenty-lour  of  the  Revised  Statutes  cf  tlie  United  States  us  provides  for  a 
charge  of  one-fifth  of  one  per  centum  for  converting  standard  gold  buUion 
into  coin  is  hereby  repealed;  and  hereafter  no  charge  shall  be  made  for  that 
service. 

168.    Repeal  of  Limit  of  Circulation,  &c. ;   Redemption  of  Legal 

Tenders. 

Section  3. — That  section  five  thousand  one  hundred  and  seventy  seven  of 
the  Revised  Statutes,  limiting  the  aggregate  amount  of  circulating  notes  of 
National  banking  associations,  be,  and  is  hereby,  repealed;  and  each  exist- 
ing banking  association  may  increase  its  circulating  notes  in  accordance  with 
existing  law  without  respect  to  said  aggregate  limit;  and  new  banking  asso- 
ciations may  be  organized  in  accordance  with  existing  law  without  respect  to 
said  aggregate  limit ;  and  the  provisions  of  law  for  the  withdrawal  and  redis- 
tribution of  National  bank  currency  among  the  several  States  and  Territories 
are  hereby  repealed.  And  whenever,  and  so  often,  as  circulating  notes 
shall  be  issued  to  any  such  banking  association,  so  increasing  its  capital  or 
circulating  notes,  or  so  newly  organized  as  aforesaid,  it  shall  be  the  duty  of 
the  Secretary  of  the  Treasury  to  redeem  the  legal-tender  United  States  notes 
in  excess  only  of  three  hundred  million  of  dollars,  to  the  amount  of  eighty  per 
centum  of  the  sum  of  National  bank  notes  so  issued  to  any  such  banking  asso- 
ciation as  aforesaid,  and  to  continue  such  redemption  as  such  circulating  notes 
are  issued  until  there  shall  be  outstanding  the  sum  of  three  hundred  million 
dollars  of  such  legal-tender  United  States  notes,  and  no  more.*  And  on  and 
after  tlie  first  day  of  January,  anno  Domini  eighteen  hundred  and  seventy- 
nine,  the  Secretary  of  the  Treasury  shall  redeem,  in  coin,  the  United  States 
legal-tender  notes  then  outstanding,  on  their  presentation  for  redempdon  at 
the  office  of  the  Assistant  Treasurer  of  the  United  States  in  the  city  of  New 
York,f  in  sums  of  not  less  than  fifty  dollars.  And  to  enable  the  Secretary 
of  the  Treasui-y  to  prepare  and  provide  for  the  redempdon  in  this  Act 
authorized  or  required,  he  is  authorized  to  use  any  surplus  revenues,  from 
time  to  time,  in  the  Treasury  not  otherwise  appropriated,  and  to  issue,  sell, 
and  dispose  of,  at  not  less  than  par,  in  coin,  either  of  the  descriptions  of 
bonds  of  the  United  States  described  in  the  Act  of  Congress  approved  July 
fourteenth,  eighteen  hundred  and  seventy,  entitled  "An  Act  to  authorize  the 
refunding  cf  the  National  debt,"  with  like  qualities,  privileges,  and  exemp- 
tions, to  the  extent  necessary  to  carry  this  Act  into  full  effect,  and  to  use  the 
proceeds  thereof  for  the  purposes  aforesaid.  And  all  provisions  of  law  incon- 
sistent with  the  provisions  of  this  Act  are  hereby  repealed. 

*The  subsequent  Act  of  May  3iFt,  1878,  prohiliited  further  retirement  of 
legal-tender  notes  and  fixed  hmit  at  amount  then  outstanding,  ^346.681,016, 
•j-  Amended  by  Act  March  3,  1887. 


1/2 

See  Revised  Statutes,  Sectious  5177  to  5181,  pars.  56-60,  and  Act 
of  June  20th,  1874,  vSections  7,  8,  and  9,  pars.  162,  163,  164. 

169.     Repeal  of  Limit  of  National  Gold  Bank  Circulation. 

An  Act  approved  January  19,  1875. 

That  so  much  of  section  five  thousand  one  hundred  and  eighty-five  of  the 
Revised  Statutes  of  the  United  States  as  limits  the  circulation  of  banking 
associations,  organized  for  the  purpose  of  issuing  notes  payable  in  gold, 
severally  to  one  miUion  dollars,  be,  and  the  same  is  hereby,  repealed;  and 
each  of  such  existing  banking  associations  may  increase  its  circulating  notes, 
and  new  banking  associations  may  be  organized,  in  accordance  with  existing 
law,  without  respect  to  such  hmitation. 

See  Section  5185,  Revised  Statutes,  par.  64. 
There  are  at  present  no  gold  banks. 

170.    Tax  on  Checks;   Notes  of  State  Banks,  etc. 

Extract  from  an  Act  approved  February  8,  1875. 

Section  15. — That  the  words  "bank  check,  draft,  or  order  for  the  pay- 
ment of  any  sum  of  money  whatsoever,  drawn  upon  any  bank,  banker,  or 
trust  company,  at  sight  or  on  demand,  two  cents,"  in  Schedule  B  of  the  Act 
of  June  thirtieth,  eighteen  hundred  and  sixty-four,  be,  and  the  same  is 
hereby,  stricken  out,  and  the  following  paragraph  inserted  in  lieu  thereof: 

"Bank  check,  draft,  order,  or  voucher  for  the  payment  of  any  sum  of 
money  whatsoever,  drawn  upon  any  bank,  banker,  or  trust  company,  two 
cents."  * 

Section  19. — That  every  person,  firm,  association  other  than  National 
bank  associations,  and  every  corporation.  State  bank,  or  State  banking  asso- 
ciation shall  pay  a  tax  of  ten  per  centum  on  the  amount  of  their  own  notes 
used  for  circulation  and  paid  out  by  them,  f 

171.     Tax  on  Notes  of  State  Banks,  Cities,  etc. 

Section  20. — That  every  such  person,  firm,  association,  corporation,  State 
bank,  or  State  banking  association,  and  also  every  National  banking  asso- 
ciation, shall  pay  a  like  tax  of  ten  per  centum  on  the  amount  of  notes  of  any 
person,  firm,  association  other  than  a  National  banking  association,  or  of  any 
corporation.  State  bank,  or  State  banking  association,  or  of  any  town,  city, 
or  municipal  corporation,  used  for  circulation  and  paid  out  by  them. 

See  Sections  3412  and  3413,  Revised  Statutes,  par.  122  and  123. 


*  Section  1 5  obsolete. 

f  See  Revised  Statutes,  par.  122-123. 


^73 

I73«    Returns  to  Commissioner  of  Internal  Revenue. 

Section  21. — That  the  amount  of  such  circulating  notes,  and  of  the  tax 
due  thereon,  shall  be  returned,  and  the  tax  paid  at  the  same  time,  and  in  the 
same  manner,  and  with  like  penalties  for  failure  to  return  and  pay  the  same,  as 
provided  by  law  for  the  return  and  payment  of  taxes  on  deposits,  capital, 
and  circulation,  imposed  by  the  existing  provisions  of  internal  revenue  law. 

See  Section  3414,  Revised  Statutes,  par.  124. 

Extracts  from  Act  of  February  18,  1875, 

Relative  to  the  National  Banking  Act  are  omitted  from  this  edition 
— the  corrections  in  the  text  required  having  been  made. 

173.   Receiver,— for  Violation  of  Law,  Insolvency,  etc. 

An  Act  approved  June  30,  1876. 

Section  i. — That  whenever  any  National  banking  association  shall  be  dis- 
solved, and  its  rights,  privileges,  and  franchises  declared  forfeited,  as  pre- 
scribed in  section  fifty-two  hundred  and  thirty-nine  of  the  Revised  Statutes 
of  the  United  States,  or  whenever  any  creditor  of  any  National  banking 
association  shall  have  obtained  a  judgment  against  it  in  any  court  of  record, 
and  made  application,  accompanied  by  a  certificate  from  the  clerk  of  the 
court  stating  that  such  judgment  has  been  rendered  and  has  remained  unpaid 
for  the  space  of  thirty  days,  or  whenever  the  Comptroller  shall  become  satisfied 
of  Xhe  insolvency  of  the  National  banking  association,  he  may,  after  due  exam- 
ination of  its  affairs,  in  either  case,  appoint  a  receiver,  who  shall  proceed  to 
close  up  such  association,  and  enforce  the  personal  liability  of  the  shareholders, 
as  provided  in  section  fifty-two  hundred  and  thirty-four  of  said  statutes. 

This  section  is  not  unconstitutional.  (Bushnellz'.  Iceland,  164  U.S. 
684.)    See  Sections  5234  and  5239,  Revised  Statutes,  pars.  113-118. 

174.     Enforcement  of  Individual  Liability  of  Shareholders. 

Section  2. — That  when  any  National  banking  association  shall  have  gone 
into  liquidation  under  the  provisions  of  section  five  thousand  two  hundred 
and  twenty  of  said  statutes,  the  individual  liability  of  the  shareholders  pro- 
vided for  by  section  fifty-one  hundred  and  fifty-one  of  said  statutes  may  be 
enforced  by  any  creditor  of  such  association,  by  bill  in  equity  in  the  nature 
of  a  creditor's  bill,  brought  by  such  creditor  on  behalf  of  himself  and  of  all 
other  creditors  of  the  association,  against  the  shareholders  thereof,  in  any 
court  of  the  United  States  having  original  jurisdiction  in  equity  for  the  dis- 
trict in  which  such  association  may  have  been  located  or  established. 

This  enables  creditors  of  banks  which  have  gone  into  voluntary' 
liquidation  to  protect  themselves  and  enforce  the  liability  of  share- 
holders through  the  courts  with  reference  to  the  Comptroller  of 
the  Currency.  As  to  the  power  of  the  court  to  appoint  a  receiver, 
see  pages  126,  127. 


174 

I75.    Agent  to  Manage  Affairs  of  Failed  Bank;  Election,  Powers,  &c. 

Section  3. — That  whenever  any  association  shall  have  been  or  shall  be 
placed  in  the  hands  of  a  receiver,  as  provided  in  section  fifty-two  hundred 
and  thirty-four  and  other  sections  of  said  statutes,  and  when,  as  provided  in 
section  fifty-two  hundred  and  thirty-six  thereof,  the  Comptroller  shall  have 
paid  to  each  and  every  creditor  of  such  association,  not  including  share- 
holders who  are  creditors  of  such  association,  whose  claim  or  claims  as  such 
creditor  shall  have  been  proved,  or  allowed  as  therein  prescribed,  the  full 
amount  of  such  claims  and  all  expenses  of  the  receivership,  and  the  redemp- 
tion of  the  circulating  notes  of  such  association  shall  have  been  provided  for 
by  depositing  lawful  money  of  the  United  States  with  the  Treasurer  of  the 
United  States,  the  Comptroller  of  the  Currency  shall  call  a  meeting  of  the 
shareholders  of  such  association  by  giving  notice  thereof  for  thirty  days  in  a 
newspaper  published  in  the  town,  city,  or  county  where  the  business  of  such 
association  was  carried  on,  or  if  no  newspaper  is  there  published,  in  the 
newspaper  published   nearest  thereto,   at  which   meeting  the   shareholders 
shall  elect  an  agent,  voting  by  ballot,  in  person  or  by  proxy,  each  share  of 
stock  entitling  the  holder  to  one  vo'.e ;  and  when  such  agent   shall  have 
received  votes  representing  at  least  a  majority  of  the  stock  in  value  and 
number  of  shares,  and  when  any  of  the  shareholders  of  the  association  shall 
have  executed  and  filed  a  bond  to  the  satisfaction  of  the  Comptroller  of  the 
Currency,  conditioned  for  the  payment  and  discharge  in  full  of  any  and 
every  claim  that  may  hereafter  be  proved  and  allowed  against  such  associa- 
tion by  and  before  a  competent  court,  and  for  the  faithful  performance  and 
discharge  of  all  and  singular  the  duties  of  such  trust,  the  Comptroller  and 
the  receiver  shall  thereupon  transfer  and  deliver  to  such  agent  all  the  undi- 
vided or  uncollected  or  other  assets  and  property  of  such  association  then 
remaining  in  the  hands  or  subject  to  the  order  or  control  of  said  Comptroller 
and  said  receiver,  or  either  of  them  ;  and  for  this  purpose,  said  Comptroller 
and  said  receiver  are  hereby  severally   empowered  to   execute  any  deed, 
assignment,  transfer,  or  other  instrument  in  writing  that  may  be  necessary 
and  proper ;  whereupon  the  said  Comptroller  and  the  said  receiver  shall,  bv 
virtue  of  this  act,  be  discharged  and  released  from  any  and  all  liabilities  to 
such   association,   and   to  each  and  all   of  the   creditors   and    shareholders 
thereof;  and  such  agent  is  hereby  authorized  to  sell,  compromise,  or  com- 
pound the  debts  due  to  such  association   upon  the  order  of  a  competent 
court  of  record  or  of  the  United  States  Circuit  Court  for  the  district  where 
the  business  of  the  association  was  carried  on.     Such  agent  shall  hold,  con- 
trol, and  dispose  of  the  assets  and  property  of  any  association  which  he  may 
receive  as  hereinbefore  provided  for  the  benefit  of  the  shareholders  of  such 
association  as  they,  or  a  majority  of  them  in  value  or  number  of  shares,  may 
direct,  distributing  such  assets   and  property  among   such   shareholders  in 
proportion  to  the  shares  held  by  each  ;  and  he  may,  in  his  own  name,  or  in 
the  name  of  such  association,  sue  and  be  sued,  and  do  all  other  lawful  acts 
and  things  necessary  to  finally  settle  and  distribute  the  assets  and  property 


175 

in  his  hands.  In  selecting  an  a<(ent  as  hereinbefore  provided,  administra- 
tors or  executors  of  deceased  shareholders  may  act  and  sign  as  a  decedent 
might  have  done  if  living,  and  guardians  may  so  act  and  sign  for  their  ward 
or  wards.     [Amended  by  Act  of  March  2d,  1S97,  par.  213.] 

176.    Sale  of  Stock  of  Shareholder  riot  Paying  Assessment. 

Section  4. — That  the  hist  clause  of  section  fifty-two  hundred  and  five  of 
said  statutes  is  hereby  amended  by  adding  to  the  said  section  the  following 
proviso  : 

"  And  provided,  That  if  any  shareholder  or  shareholders  of  such  bank 
shall  neglect  or  refuse,  after  three  months'  notice,  to  pay  the  assessment,  as 
provided  in  this  section,  it  shall  be  the  duty  of  the  board  of  directors  to  cause 
a  sufficient  amount  of  the  capital  stock  of  such  shareholder  or  shareholders 
to  be  sold  at  public  auction  (after  thirty  days*  notice  shall  be  given  by  post- 
ing such  notice  of  sale  in  the  office  of  the  bank,  and  by  publishing  such 
notice  in  a  newspaper  of  the  city  or  town  in  which  the  bank  is  located,  or  in  a 
newspaper  published  nearest  thereto),  to  make  good  the  deficiency ;  and  the 
balance,  if  any,  shall  be  returned  to  such  delinquent  shareholder  or  share- 
holders. 

177.     Stamping  Counterfeit  Notes. 

Section  5. — That  all  United  States  officers  charged  with  the  receipt  or  dis- 
bursements of  public  moneys,  and  all  officers  of  National  banks,  shall  stamp 
or  write  in  plain  letters  the  word  "counterfeit,"  "altered,''  or  "  worthless," 
upon  all  fraudulent  notes  issued  in  the  form  of,  and  intended  to  circulate  as 
money  which  shall  be  presented  at  their  places  of  business  ;  and  if  such  offi- 
cers shall  wrongfully  stamp  any  genuine  note  of  the  United  States,  or  of  the 
National  banks,  they  shall,  upon  presentation,  redeem  such  notes  at  the  face 
value  thereof. 

178.     Savings   Banks,  etc.,  to  make  Reports. 

Section  6. — That  all  savings  banks  or  savings  and  trust  companies  organ- 
ized under  authority  of  any  act  of  Congress  shall  be,  and  are  hereby,  required 
to  make,  to  the  Comptroller  of  the  Currency,  and  publish,  all  the  reports 
which  National  banking  associations  are  required  to  make  and  publish  under 
the  provisions  of  sections  fifty  two  hundred  and  eleven,  fifty-two  hundred 
and  twelve,  and  fifty-two  hundred  and  thirteen  of  the  Revised  Statutes,  and 
shall  be  subject  to  the  same  penalties  for  failure  to  make  or  publish  such 
reports  as  are  therein  provided  ;  which  penalties  may  be  collected  by  suit 
before  any  court  of  the  United  States  in  the  district  in  which  said  savings 
banks  or  savings  and  trust  companies  may  be  located.  And  all  savings  or 
other  banks  now  organized,  or  which  shall  hereafter  be  organized,  in  the 
District  of  Columbia,  under  any  act  of  Congress,  which  shall  have  capital 
stock  paid  up  in  whole  or  in  part,  shall  be  subject  to  all  the  provisions  of  the 
Revised  Statutes,  and  of  all  acts  of  Congress,  applicable  to  National  banking 


176 

associations,  so  far  as  the  same  may  be  applicable  to  such  savings  or  other 
banks.  Provided,  That  such  savings  banks  now  estabhshed  shall  not  be 
required  to  have  a  paid-in  capital  exceeding  one  hundred  thousand  dollars. 

See  Sections  5211-5213,  pars.  87-89. 

179.     Abating  Semi- Annual   Duty  of  Insolvent  Banks. 

Extract  from  an  Act  approved  March  i,  1879. 

That  whenever  and  after  any  bank  has  ceased  to  do  business  by  reason  of 
insolvency  or  bankruptcy,  no  tax  shall  be  assessed  or  collected,  or  paid  into 
the  Treasury  of  the  United  States,  on  account  of  such  bank,  which  shall 
diminish  the  assets  thereof  necessary  for  the  full  payment  of  all  its  depositors; 
and  such  tax  shall  be  abated  from  such  National  banks  as  are  found  by  the 
Comptroller  of  the  Currency  to  be  insolvent ;  and  the  Commissioner  of 
Internal  Revenue,  when  the  facts  shall  so  appear  to  him,  is  authorized  to 
remit  so  much  of  said  tax  against  insolvent  State  and  savings  banks  as  shall 
be  found  to  affect  the  claims  of  their  depositors. 

Johnston  v.  United  States,  17  Court  of  Claims  Reports. 

180.     Conversion  of  National  Gold   Banks. 

An  Act  approved  February  14,  1880. 

That  any  National  gold  bank  organized  under  the  provisions  of  the  laws 
of  the  United  States,  may,  in  the  manner  and  subject  to  the  provisions  pre- 
scribed by  section  fifty-one  hundred  and  fifty-four  of  the  Revised  Statutes  of 
the  United  States,  for  the  conversion  of  banks  incorporated  under  the  laws 
of  any  State,  cease  to  be  a  gold  bank,  and  become  such  an  association  as  is 
authorized  by  section  fifty-one  hundred  and  thirty-three,  for  carrying  on  the 
business  of  banking,  and  shall  have  the  same  powers  and  privileges,  and 
shall  be  subject  to  the  same  duties,  responsibilities,  and  rules,  in  all  respects, 
as  are  by  law  prescribed  for  such  associations  •  Provided,  That  all  certificates 
of  organization  which  shall  be  issued  under  this  act  shall  bear  the  date  of  the 
original  organization  of  each  bank  respectively  as  a  gold  bank. 

All  the  existing  gold  banks  have  either  gone  out  of  existence 
or  have  been  converted  into  ordinary  National  banking  a.ssocia- 
tions  under  this  Act. 

181.     Verification  of   Returns   of  National   Banks. 

An  Act  approved  February  26,  1881. 
That  the  oath  or  affirmation  required  by  section  fifty-two  hundred  and 
eleven  of  the  Revised  Statutes,  verifying  the  returns  made  by  National  banks 
to  the  Comptroller  of  the  Currency,  when  taken  before  a  notary  public 
properly  authorized  and  commissioned  by  the  State  in  which  said  notary 
resides  and  the  bank  is  located,  or  any  other  officer  having  an  official  seal, 


177 

authorized  in  such  State  to  administer  oaths,  shall  be  a  sufficient  verification 
as  contemplated  by  said  section  titty-two  hundred  and  eleven :  Provided, 
That  the  officer  administering  the  oath  is  not  an  officer  of  the  bank. 

182.    To  Extend   Corporate  Existence,  etc. 

An  Act  approved  July  12,  1882, 

That  any  National  banking  association  organized  under  the  Acts  of  Feb- 
ruary twenty-fifth,  eighteen  hundred  and  sixty-three,  June  third,  eighteen 
hundred  and  sixty-four,  and  February  fourteenth,  eighteen  hundred  and 
eighty,  or  under  sections  fifty-  one  hundred  and  thirty-three,  fifty-one  hundred 
and  thirty-four,  fifty-one  hundred  and  thirty-five,  fifty-one  hundred  and  thirty- 
six,  and  fifty-one  hundred  and  fifty-four  of  the  Revised  Statutes  of  the  United 
States,  may,  at  any  time  within  the  two  years  next  previous  to  the  date 
of  the  expiration  of  its  corporate  existence  under  present  law,  and  with 
the  approval  of  the  Comptroller  of  the  Currency,  to  be  granted  as  herein- 
after provided,  extend  its  period  of  succession  by  amending  its  articles  of 
association  for  a  term  of  not  more  than  twenty  years  from  the  expiration  of 
the  period  of  succession  named  in  said  articles  of  association,  and  shall  have 
succession  for  such  extended  period,  unless  sooner  dissolved  by  the  act  of 
shareholders  owning  two-thirds  of  its  stock,  or  unless  its  franchise  becomes 
forfeited  by  some  violation  of  law,  unless  hereafter  modified  or  repealed. 

Section  2. — That  such  amendment  of  said  articles  of  association  shall  be 
authorized  by  the  consent  in  writing  of  shareholders  owning  not  less  than 
two-thirds  of  the  capital  stock  of  the  association ;  and  the  board  of  directors 
shall  cause  such  consent  to  be  certified  under  the  seal  of  the  association,  by 
its  president  or  cashier,  to  the  Comptroller  of  the  Cunency,  accompanied  by 
an  application  made  by  the  president  or  cashier  for  the  approval  of  the 
amended  articles  of  association  by  the  Comptroller;  and  such  amended  arti- 
cles of  association  shall  not  be  valid  until  the  Comptroller  shall  give  to  such 
association  a  certificate,  under  his  hand  and  seal,  that  the  association  has  com- 
plied with  all  the  provisions  required  to  be  complied  with,  and  is  authorized 
to  have  succession  for  the  extended  period  named  in  the  amended  articles  of 
association. 

For  instructions  and  forms,  see  pages  229-235. 

183.    Special  Examination  of  Extended  Banks. 

Section  3. — That  upon  the  receipt  of  the  application  and  certificate  of  the 
association  provided  for  in  the  preceding  section,  the  Comptrollor  of  the 
Currency  shall  cause  a  special  examination  to  be  made,  at  the  expense  of 
the  association,  to  determine  its  condition;  and  if  after  such  examination  or 
otherwise  it  appears  to  him  that  said  association  is  in  a  satisfactory  condition, 
he  shall  grant  his  certificate  of  approval  provided  for  in  the  preceding 
section,  or  if  it  appears  that  the  condition  of  said  association  is  not  satisfac- 
tory, he  shall  withhold  such  certificate  of  approval. 
12 


178 

Upon  receipt  of  the  application  and  papers,  they  are  examined 
in  the  Comptroller's  oflSce,  and  if  found  satisfactory  the  associa- 
tion is  notified  that  the  papers  are  placed  on  file,  and  that  the  ex- 
amination required  by  this  section  will  be  made  in  due  course. 
The  examination  is  usually  made  shortly  before  the  date  of  expira- 
tion of  first  period  of  succession,  and  as  soon  as  the  examirier's 
report  is  received,  if  satisfactory^,  the  certificate  approving  the 
extension  is  issued  a  few  days  before  the  date  of  the  expiration. 
This  certificate  of  approval  is  required  to  be  published  by  regula- 
tion of  the  Comptroller's  ofl&ce. 

184.    Privileges,  Liabilities,  &c.,  of  Extended  Banks;  Jurisdiction 

of  Suits.* 

Section  4. — That  any  association  so  extending  the  period  of  its  succes- 
sion shall  continue  to  enjoy  all  the  rights  and  privileges  and  immunities 
granted,  and  shall  continue  to  be  subject  to  all  the  duties,  Habihties,  and 
restrictions  imposed  by  the  Revised  Statutes  of  the  United  States  and  other 
Acts  having  reference  to  National  banking  associations,  and  it  shall  continue 
to  be  in  all  respects  the  identical  association  it  was  before  the  extension  of  its 
period  of  succession ;  Provided,  however,  That  the  jurisdiction  for  suits  here- 
after brought  by  or  against  any  association  established  under  any  lavir  pro- 
viding for  National  banking  associations,  except  suits  between  them  and  the 
United  States,  or  its  officers  and  agents,  shall  be  the  same  as,  and  not  other 
than,  the  jurisdiction  for  suits  by  or  against  banks  not  organized  under  any 
law  of  the  United  States  which  do  or  might  do  banking  business  where  such 
National  banking  associations  may  be  doing  business  when  such  suits  may 
be  begun.  And  all  laws  and  parts  of  laws  of  the  United  States  inconsistent 
with  this  proviso  be,  and  the  same  are  hereby,  repealed. 

A  bond  given  to  a  National  bank  by  the  individual  members  of 
a  corporation  to  secure  such  paper  as  the  bank  may  discount  for 
the  corporation  does  not  expire  with  the  termination  of  the  twenty 
years  for  which  the  bank  was  originally  incorporated,  and  the 
obligors  are  liable  for  discounts  made  after  the  bank  has  extended 
the  period  of  its  existence.  (The  National  Exchange  Bank  of 
Hartford  v.  Guy,  57  Conn.,  224.) 

185.    Witiidrawal  of  Shareholders;  Preference  in  Allotment. 

Section  5. — That  when  any  National  banking  association  has  amended 
its  articles  of  association  as  provided  in  this  Act,  and  the  Comptroller  has 
granted  his  certificate  of  approval,  any  shareholder  not  assenting  to  such 
amendment  may  give  notice  in  writing  to  the  directors,  within  thirty  days 


*  See  Act  August  13,  1888,  par.  206. 


1/9 

from  the  date  of  the  certificate  of  approval,  of  his  desire  to  withdraw  from 
said  association,  in  which  case  he  shall  be  entitled  to  receive  from  said  bank- 
ing association  the  value  of  the  shares  so  held  by  him,  to  be  ascertained  by 
an  appraisal  made  by  a  committee  of  three  persons,  one  to  be  selected  by 
such  shareholder,  one  by  the  dircttors,  and  the  third  by  the  first  two;  and  in 
case  the  value  su  fixed  shall  not  be  satisfactory  to  any  such  shareholder,  he 
may  appeal  to  the  Comptroller  of  the  Currency,  who  shall  cause  a  reappraisal 
to  be  made,  which  shall  be  final  and  binding;  and  if  said  reappraisal  shall 
exceed  the  value  fixed  by  said  committee,  the  bank  shall  pay  the  expenses  of 
i,aid  reappraisal,  and  otherwise  the  appellant  shall  pay  said  exjjcnses ;  and 
the  value  so  ascertained  and  determined  shall  be  deemed  to  be  a  debt  due, 
and  be  forthwith  paid,  to  said  shareholder,  from  said  bank;  and  the  shares 
so  surrendered  and  appraised  shall,  after  due  notice,  be  sold  at  public  sale, 
within  thirty  days  after  the  final  appraisal  provided  in  this  section:  Provided, 
That  in  the  organization  of  any  banking  association,  intended  to  replace  any 
existing  banking  association,  and  retaining  the  name  thereof,  the  holders  of 
stock  in  the  expiring  association  shall  be  entitled  to  preference  in  the  allot- 
ment of  the  shares  of  the  new  association  in  proportion  to  the  number  of 
shares  held  by  them- respectively  in  the  expiring  association. 

iS6.     Extended  Banks— 0!d  and  New  Notes;  Lawful  Money 

Deposit. 

Section  6. — That  the  circulating  notes  of  any  association  so  extending 
the  period  of  its  succession,  which  shall  have  been  issued  to  it  prior  to  such 
extension,  shall  be  redeemed  at  the  Treasury  of  the  United  States,  as  pro- 
vided in  section  three  of  the  Act  of  June  twentieth,  eighteen  hundred  and 
seventy-four,  entitled  "  An  Act  fixing  the  amount  of  United  States  notes, 
providing  for  redistribution  of  National  bank  currency,  and  for  other  pur- 
poses," and  such  notes  when  redeemed  shall  be  forwarded  to  the  Comp- 
troller of  the  Currency  and  destroyed,  as  now  provided  by  law;  and  at  the 
end  of  three  years  from  the  date  of  the  extension  of  the  corporate  existence 
of  each  bank  the  association  so  extended  shall  deposit  lawful  money  with 
the  Treasurer  of  the  United  States  suflicient  to  redeem  the  remainder  of  the 
circulation  which  was  outstanding  at  the  date  of  its  extension,  as  provided 
in  sections  fifty-two  hundred  and  twenty- two,  fifty-two  hundred  and  twenty- 
four,  and  fifty-two  hundred  and  twenty-five  of  the  Revised  Statutes;  and 
any  gain  that  may  arise  from  the  failure  to  present  such,  circulating  notes  for 
redemption  shall  inure  to  the  benefit  of  the  United  States;  and  from  time  to 
time,  as  such  notes  are  redeemed  or  lawful  money  deposited  therefor  as  pro- 
vided herein,  new  circulating  notes  shall  be  issued  as  provided  for  by  this 
act.  bearing  such  devices,  to  be  approved  by  the  Secretary  of  the  Treasury, 
as  shall  make  them  readily  distinguishable  from  the  circulating  notes  hereto- 
fore issued:  Provided^  however,  That  each  banking  association  which  shall 
obtain  the  benefit  of  this  Act  shall  reimburse  to  the  Treasury  the  cost  of  pre- 
paring the  plate  or  plates  for  such  new  circulating  notes  as  shall  be  issued  to  it. 


i8o 

187.    Requirements  of  Banks  not  Extending. 

Section  7. — That  National  banking  associations  whose  corporate  exist- 
ence has  expired,  or  shall  hereafter  expire,  and  which  do  not  avail  themselves 
of  the  provisions  of  this  Act,  shall  be  required  to  comply  with  the  provisions 
of  sections  fifty-two  hundred  and  twenty-one  and  fifty-two  hundred  and 
twenty-two  of  the  Revised  Statutes  in  the  same  manner  as  if  the  share- 
holders had  voted  to  go  into  liquidation,  as  provided  in  section  fifty-two 
hundred  and  twenty  of  the  Revised  Statutes;  and  the  provisions  of  sections 
fifty-two  hundred  and  twenty-four  and  fii"ty-two  hundred  and  twenty-five  of 
the  Revised  Statutes  shall  also  be  applicable  to  such  associations,  except  as 
modified  by  this  Act ;  and  the  franchise  of  such  association  is  hereby  ex- 
tended for  the  sole  purpose  of  hquidating  their  affairs  until  such  affairs  are 
finally  closed. 

The  Comptroller  sends  blanks  to  expiring  associations  to  enable 
them  to  give  the  notice  to  his  ofEce  required  by  Section  5222,  Re- 
vised Statutes,  par.  10 1.     Such  expiring  associations  must,  within 
six  months  from  the  date  of  their  expiration,  deposit  lawful  money 
to  retire  their  circulation.     [See  also  Supplement.] 

188.    Minimum  Bonds  of  Banks  of  $150^000  Capital  or  Less,  &c. 

Section  8. — That  National  Banks  now  organized,  or  hereafter  organized, 
having  a  capital  of  one  hundred  and  fifty  thousand  dollars  or  less,  shall  not 
be  required  to  keep  on  deposit,  or  deposit  with  the  Treasurer  of  the  United 
States,  United  States  bonds  in  excess  of  one-fourth  of  their  capital  stock  as 
security  for  their  circulating  notes  ;  but  such  banks  shall  keep  on  deposit,  or 
deposit  with  the  Treasurer  of  the  United  States,  the  amount  of  bonds  as 
herein  required  ;  and  such  of  those  banks  having  on  deposit  bonds  in  excess 
of  that  amount  are  authorized  to  reduce  their  circulation  by  the  deposit  of 
lawful  money,  as  provided  by  law:  Provided,  That  the  amount  of  such  circu- 
lating notes  shall  not  exceed  in  any  case  ninety  per  centum  of  the  par  value 
of  the  bonds  deposited  as  herein  provided :  Provided  further^  That  the 
National  banks  which  shall  hereafter  make  deposits  of  lawful  money  for  the 
retirement  in  full  of  their  circulation  shall,  at  the  time  of  their  deposit,  be 
assessed  for  the  cost  of  transporting  and  redeeming  their  notes  then  outstand- 
ing a  sum  equal  to  the  average  cost  of  the  redemption  of  National  bank  notes 
during  the  preceding  year,  and  shall  thereupon  pay  such  assessment ;  and 
all  National  banks  which  have  heretofore  made,  or  shall  hereafter  make, 
deposits  of  lawful  money  for  the  reduction  of  their  circulation,  shall  be 
assessed  and  shall  pay  an  assessment  in  the  manner  specified  in  section  three 
of  the  Act  approved  June  twentieth,  eighteen  hundred  and  seventy-four,  for 
the  cost  of  transporting  and  redeeming  their  notes  redeemed  from  such  de- 
posits subsequently  to  June  thirtieth,  eighteen  hundred  and  eighty-one. 
[Amended  by  Act  March  14,  1900,  (p.  316)  as  to  circulation  on  bond  deposit.] 


i8i 

189.    Retiring  Circulation  and  Reissue. 

Section  9. — That  any  National  Banking  association  now  organized,  or 
hereafter  organized,  desiring  to  withdraw  its  circulating  notes,  upon  a  deposit 
of  lawful  money  with  the  Treasurer  of  the  United  States,  as  provided  in  sec- 
tion four  of  the  Act  of  June  twentieth,  eighteen  hundred  and  seventy-four, 
entitled  "An  Act  fixing  the  amount  of  United  States  notes,  providing  for  a 
redistribution  of  National  bank  currency,  and  for  other  purposes,"  or  as  pro- 
vided in  this  act,  is  authorized  to  deposit  lawful  money  and  withdraw  a  pro- 
portionate amount  of  the  bonds  held  as  security  for  its  circulating  notes  in 
the  order  of  such  deposits  ;  and  no  National  bank  which  makes  any  deposit 
of  lawful  money  in  order  to  withdraw  its  circulating  notes  shall  be  entitled  to 
receive  any  increase  of  its  circulation  for  tlie  period  of  six  months  from  the 
time  it  made  such  deposits  of  lawful  money  for  the  purpose  aforesaid  '* Pro- 
vided, That  not  more  than  three  millions  of  dollars  of  lawful  money  shall  be 
deposited  during  any  calendar  month  for  this  purpose :  And  provided  fur- 
ther, That  the  provisions  of  this  section  shall  not  apply  to  bonds  called  for 
redemption  by  the  Secretary  of  the  Treasury,  nor  to  the  withdrawal  of  circu- 
lating notes  in  consequence  thereof.     [See  Amendment,  page  319.] 

190.     Amount  of  Circulation  on  United  States  Bonds. 

Section  10. — That  upon  a  deposit  of  bonds  as  described  by  sections  fifty- 
(jne  hundred  and  fifty- nine  and  fifty-one  hundred  and  sixty,  except  as  modi- 
fied by  section  four  of  an  Act  entitled  "An  Act  fixing  the  amount  of  United 
States  notes,  providing  for  a  redistribution  of  the  National  bank  currency, 
and  for  other  purposes,"  approved  June  twentieth,  eighteen  hundred  and 
seventy-four,  and  as  modified  by  section  eight  of  this  act,  the  association 
making  the  same  shall  be  entitled  to  receive  from  the  Comptroller  of  the 
Currency  circulating  notes  of  different  denominations,  in  blank,  registered 
and  countersigned  as  provided  by  law,  equal  in  amount  to  ninety  per  centum 
of  the  current  market  value  not  exceeding  par,  of  the  United  States  bonds  so 
transferred  and  delivered,  and  at  no  time  shall  the  total  amount  of  such 
notes  issued  to  any  such  association  exceed  ninety  per  centum  of  the  amount 
at  such  time  actually  paid  in  of  its  capital  stock  ;  and  the  provisions  of  section 
fifty-one  hundred  and  seventy-one  and  fifty-one  hundred  and  seventy-six  of 
the  Revised  Statutes  are  hereby  repealed.  [vSuperseded  by  Act  of  March  14, 
1900,  page  316.] 

191.    Concerning  Three- Per-cent.  Bonds. 

Obsolete. 
Section  ii. — That  the  Secretary  of  the  Treasury  is  hereby  authorized  to 
receive  at  the  Treasury  any  bonds  of  the  United  States  bearing  three  and  a 
half  per  centum  interest,  and  to  issue  in  exchange  therefor  an  equal  amount 
of  registered  bonds  of  the  United  States  of  the  denominations  of  fifty,  one  hun- 
dred, five  hundred,  one  thousand,  and  ten  thousand  dollars,  of  such  form  as  he 
may  prescribe,  bearing  interest  at  the  rate  of  three  per  centum  per  annum, 

*Tbe  six  months'  restriction  repealed  by  Act  of  March  14,  1900. 


l82 

payable  quarterly  at  the  Treasury  of  the  United  States.  Such  bonds  shall  be 
exempt  from  all  taxation  by  or  under  State  authority,  and  be  payable  at  the 
pleasure  of  the  United  States :  Provided,  That  the  bonds  herein  authorized 
shall  not  be  called  in  and  paid  so  long  as  any  bonds  of  the  United  States 
heretofore  issued  bearing  a  higher  rate  of  interest  than  three  per  centum,  and 
which  shall  be  redeemable  at  the  pleasure  of  the  United  States,  shall  be  out- 
standing and  uncalled.  The  last  of  the  said  bonds  originally  issued  under 
this  act,  and  their  substitutes,  shall  be  first  called  in,  and  this  order  of  pay- 
ment shall  be  followed  until  all  shall  have  been  paid. 

192.     Gold  and  5iiver  Certificates :   Clearing-House  Restrictions. 

Section  12. — That  the  Secretary  of  the  Treasury  is  authorized  and  directed 
to  receive  deposits  of  gold  coin  with  the  Treasurer  or  Assistant  Treasurers  of 
the  United  States,  in  sums  of  not  less  than  twenty  dollars,  and  to  issue  certifi- 
cates therefor  in  denominations  of  not  less  than  twenty  dollars  each,  corres- 
ponding with  the  denominations  of  United  States  notes.  The  coin  deposited" 
for  or  representing  the  certificates  of  deposit  shall  be  retained  in  the  Treasury 
for  the  payment  of  the  same  on  demand.  Said  certificates  shall  be  receiva- 
Vjle  for  customs,  taxes,  and  all  public  dues,  and  when  so  received  may  be 
reissued ;  and  such  certificates,  as  also  silver  certificates,  when  held  by  any 
National  banking  association,  shall  be  counted  as  part  of  its  lawful  reserve; 
and  no  National  banking  association  shall  be  a  member  of  any  clearing- 
house in  which  such  certificates  shall  not  be  receivable  in  the  settlement  of 
clearing-house  balances :  Provided,  That  the  Secretary  of  the  Treasury  shall 
suspend  the  issue  of  such  gold  certificates  whenever  the  amount  of  gold  coin 
and  gold  bullion  in  the  Treasury  reserved  for  the  redemption  of  United 
States  notes  falls  below  one  hundred  millions  of  dollars;  and  the  provisions 
of  Section  fifty-two  hundred  and  seven  of  the  Revised  Statutes  shall  be 
applicable  to  the  certificates  herein  authorized  and  directed  to  be  issued. 

193.     Penalty  for  Illegal  Issue  of  Certified  Checks. 

Section  13. — That  any  officer,  clerk,  or  agent  of  any  N.ational  banking 
association  who  shall  wilfully  violate  the  provisions  of  an  act  entitled,  "  An 
Act  in  reference  to  certifying  checks  by  National  banks,"  approved  March 
third,  eighteen  hundred  and  sixty-nine,  being  section  fifty-two  hundred  and 
eight  of  the  Revised  Statutes  of  the  United  States,  or  who  shall  resort  to  any 
device,  or  receive  any  fictitious  obligation,  direct  or  collateral,  in  order  to 
evade  the  provisions  thereof,  or  who  shall  certify  checks  before  the  amount 
thereof  shall  have  been  regularly  entered  to  the  credit  of  the  dealer  upon  the 
books  of  the  banking  association,  shall  be  deemed  guilty  of  a  misdemeanor, 
and  shall,  on  conviction  thereof  in  any  circuit  or  district  court  of  the  United 
States,  be  fined  not  more  than  five  thousand  dollars,  or  shall  be  imprisoned 
not  more  than  five  years,  or  both,  in  the  discretion  of  the  court. 


i«3 


194.     Congress  may  Amend. 

Section  14. — That  Congress  may  at  any  time  amend,  alter,  or  repeal  this 
act  and  the  acts  of  which  this  is  amendatory. 


195.     Repealing  Tax  on  Capital  and  Deposits  of  Banks. 

Extract  from  an  Act  approved  March  3,  1883. 

That  the  taxes  herein  specified  imposed  by  the  laws  now  in  force  be,  and 
the  same  are  hereby,  repealed,  as  hereinafter  provided,  namely :  On  capital 
and  deposits  of  banks,  bankers,  and  National  banking  associations,  except 
such  taxes  as  are  now  due  and  payable ;  and  on  and  after  the  first  day  of 
July,  eighteen  hundred  and  eighty-three,  the  stamp  tax  on  bank  checks, 
drafts,  orders,  and  vouchers. 

See  decision  Attorney  General  of  the  United  States,  May  i8th, 
1883. 

196.     Receivers  to  Protect  Equities  in  Real  Estate,  etc. 

An  Act  approved  March  29,  1886. 

Section  i. — That  whenever  the  receiver  of  any  National  bank  duly 
appointed  by  the  Comptroller  of  the  Currency,  and  who  shall  have  duly 
qualified  and  entered  upon  the  discharge  of  his  trust,  shall  find  it  in  his 
opinion  necessary,  in  order  to  fully  protect  and  benefit  his  said  trust,  to  the 
extent  of  any  and  all  equities  that  such  trust  may  have  in  any  property, 
real  or  personal,  by  reason  of  any  bond,  mortgage,  assignment,  or  other 
proper  legal  claim  attaching  thereto,  and  which  said  property  is  to  be  sold 
under  any  execution,  decree  of  foreclosure,  or  proper  order  of  any  court  of 
jurisdiction,  he  may  certify  the  facts  in  the  case,  together  with  his  opinion  as 
to  the  value  of  the  property  to  be  sold,  and  the  value  of  the  equity  his  said 
trust  may  have  in  the  same,  to  the  Comptroller  of  the  Currency,  together 
with  a  request  for  the  right  and  authority  to  use  and  employ  so  much  of 
the  money  of  said  trust  as  may  be  necessary  to  purchase  such  property  at 
such  sale. 

Under  Section  5234,  par.  113,  the  receiver  is  required  to  pay 
over  all  money  collected  by  him  to  the  Treasurer  of  the  United 
States.  It  often  occurred  that  real  estate  of  the  bank  or  other 
assets  might  be  incumbered  by  mortgages  or  claims.  The  law  of 
March  29th,  1886,  was  passed  to  provide  a  way  in  which  these 
incumbrances  might  be  removed,  by  paying  them  off  with  money 
derived  from  the  collection  of  other  assets.  The  first  section  pro- 
vides for  bringing  the  necessity  of  action  to  the  knowledge  of  the 
Comptroller, 


1 84 

197.    Receiver's  Report  must  be  Approved. 

Section  2. — That  such  request,  if  approved  by  the  Comptroller  of  the 
Currency,  shall  be,  together  with  the  certificate  of  facts  in  the  case,  and  his 
recommendation  as  to  the  amount  of  money  which,  in  his  judgment,  should 
be  so  used  and  employed,  submitted  to  the  Secretary  of  the  Treasury  ;  and 
if  the  same  shall  likewise  be  approved  by  him,  the  request  shall  be  by  the 
Comptroller  of  the  Currency  allowed,  and  notice  thereof,  with  copies  of  the 
request,  certificate  of  facts,  and  indorsement  of  approvals,  shall  be  filed  with 
the  Treasurer  of  the  United  States. 

This  section  requires  the  Comptroller  to  make  certificate  of  the 
facts,  the  amount  of  money  required,  &c.,  to  the  Secretary  of  the 
Treasury.  If  the  Secretary  approves  the  matter,  all  the  papers 
are  turned  over  to  the  Treasurer,  so  that  he  has  evidence  before 
him  of  the  nature  of  the  draft  about  to  be  drawn  upon  the  funds 
deposited  with  him  by  the  receiver. 

198.    Payment  for  Property  to  be  Made  by  Comptroller. 

Section  3. — That  whenever  any  such  requests  shall  be  allowed  as  herein- 
before provided,  the  said  Comptroller  of  the  Currency  shall  be,  and  is,  em- 
powered to  draw  upon  and  from  such  funds  of  any  such  trust  as  may  be 
deposited  with  the  Treasurer  of  the  United  States  for  the  benefit  of  the  bank 
in  interest  to  the  amount  as  may  be  recommended  and  allowed  and  for  the 
purpose  for  which  such  allowance  was  made :  Provided,  however,  That  all 
payments  to  be  made  for  or  on  account  of  the  purchase  of  any  such  prop- 
erty and  under  any  such  allowance  shall  be  made  by  the  Comptroller  of  the 
Currency  direct,  with  the  approval  of  the  Secretary  of  the  Treasury,  for  such 
purpose  only  and  in  such  manner  as  he  may  determine  and  order. 

199.     Increase  of  Capital  Stock. 

An  Act  approved  May  i,  1886. 
Section  i. — That  any  National  banking  association  may,  with  the  approval 
of  the  Comptroller  of  the  Currency,  by  the  vote  of  shareholders  owning  two- 
thirds  of  the  stock  of  such  association,  increase  its  capital  stock,  in  accord- 
ance with  existing  laws,  to  any  sum  approved  by  the  said  Comptroller,  not- 
withstanding the  limit  fixed  in  its  original  articles  of  association  and  deter- 
mined by  said  Comptroller;  and  no  increase  of  the  capital  stock  of  any 
National  banking  association,  either  within  or  beyond  the  limit  fixed  in  its 
original  articles  of  association,  shall  be  made  except  in  the  manner  herein 
provided. 

See  Section  5142  (par.  24.),  under  which  it  is  provided  that  the 
maximum  limit  of  increase  of  capital  must  be  fixed  and  deter- 
mined in  the  original  articles  of  association  by  the  Comptroller. 


i85 

The  Attorney-General  decided  that  the  maximum  limit  having 
once  been  fixed,  could  not  be  changed  except  by  act  of  Congress. 
The  Act  of  May  ist,  1886,  is  a  general  act;  gives  the  power  to 
the  Comptroller  to  change  the  maximum  limit  of  increase  ot 
capital,  and  also  makes  a  change  in  the  manner  of  such  increase 
which  could  previously  be  made  by  the  directors  without  consult- 
ing the  stockholders. 

aoo.     Change  of  Name  and  Location. 

Section  2. — That  any  National  banking  association  may  change  its  name 
or  the  place  where  its  operations  of  discount  and  deposits  are  to  be  carried 
on  to  any  other  place  within  the  same  State,  not  more  than  thirty  miles  dis- 
tant, with  the  approval  of  the  Comptroller  of  the  Currency,  by  the  vote  of 
shareholders  owning  two-thirds  of  the  stock  of  such  association.  A  duly 
authenticated  notice  of  the  vote  and  of  the  new  name  or  location  selected 
shall  be  sent  to  the  office  of  the  Comptroller  of  the  Currency;  but  no  change 
of  name  or  location  shall  be  valid  until  the  Comptroller  shall  have  issued  his 
certificate  of  approval  of  the  same. 

How  to  Proceed. — Prior  to  the  passage  of  this  law  no  bank 
could  change  its  name  or  location  except  bj^  special  act  of  Congress. 

The  Comptroller  of  the  Currency  does  not  furnish  blank  forms 
to  be  used  in  making  changes  of  name  or  location.  All  that  is 
required  is  for  the  shareholders  representing  the  requisite  amount 
of  capital  stock  to  pass  a  suitable  resolution  authorizing  such 
change,  and  for  the  officers  of  the  bank  to  forward  a  certified  copy 
of  such  resolution  to  the  Comptroller  of  the  Currenc}^  when,  if 
he  approves  of  the  change,  he  will  issue  his  certificate  to  the  effect 
that  the  change  has  been  duly  authorized  and  is  approved  bj'^  him. 

There  seems  to  be  no  reason  whj^  a  change  of  name  may  not  be 
made  as  often  as  desired.  And  perhaps  there  may  be  more  than 
one  removal,  but  it  would  seem  that  the  bank  could  not  by  several 
successive  removals  get  to  a  place  more  than  thirty  miles  distant 
from  its  original  location. 

This  act  is  to  be  construed  with  reference  to  the  other  provisions 
of  law  governing  the  National  banks ;  and,  therefore,  where  the 
removal  is  to  be  made  to  a  larger  place,  the  capital  stock  must 
first  be  increased  to  the  amount  required  for  banks  in  such  place. 
It  is  important  for  the  stockholders  to  bear  this  in  mind  when 
determining  the  question  of  removal. 

As  in  other  cases  where  a  two-thirds  vote  of  the  stockholders  is 
required,  this  means  a  vote  representing  two-thirds  of  the  whole 


1 86 

number  of  shares  and  not  merely  two-thirds  of  those  represented 
at  the  meeting. 

It  is  not  necessary  to  forward  to  the  Comptroller  any  evidence 
to  show  that  the  place  to  which  the  removal  is  to  be  made  is  not 
more  than  thirty  miles  distant ;  this  fact  the  Comptroller  will 
himself  take  notice  of,  or,  if  necessary,  he  will  ascertain  the  fact 
from  the  proper  sources  of  information  in  such  cases. 

There  have  been  several  cases  of  removal  under  this  act,  and  a 
number  of  changes  of  name. 

20I.    Liabilities,  etc.,  under  Old  Name. 

Section  3. — That  all  debts,  liabilities,  rights,  provisions,  and  powers  of 
the  association  under  its  old  name  shall  devolve  upon  and  inure  to  the  asso- 
ciation under  its  new  name. 

202.    New  Name  or  Location  Not  To  Release  from  Liabilities,  etc. 

Section  4. — That  nothing  in  this  ?ct  contained  shall  be  so  construed  as  in 
any  manner  to  release  any  National  banking  association  under  its  old  name 
or  at  its  old  location  from  any  liability,  or  affect  any  action  or  proceeding  in 
law  in  which  said  association  may  be  or  become  a  party  or  interested. 

203.     Requirements  To  Become  Reserve  Cities. 

An  Act  Approved  March  3,  1887. 

That  whenever  three-fourths  in  number  of  the  National  banks  located  in 
any  city  of  the  United  States  having  a  population  of  fifty  thousand  people 
shall  make  application  to  the  Comptroller  of  the  Currency,  in  writing, 
asking  that  the  name  of  the  city  in  which  such  banks  are  located  shall  be 
added  to  the  cities  named  in  sections  fifty-one  hundred  and  ninety-one  and 
fifty-one  hundred  and  ninety-two  of  the  Revised  Statutes,  the  Comptroller 
shall  have  authority  to  grant  such  request,  and  every  bank  located  in  such 
city  shall  at  all  times  thereafter  have  on  hand,  in  lawful  money  of  the  United 
States,  an  amount  equal  to  at  least  twenty-five  per  centum  of  its  deposits,  as 
provided  in  sections  fifty-one  hundred  and  ninety-one  and  fifty-one  hundred 
and  ninety-five  of  the  Revised  Statutes. 

Amended  by  act  of  March  3,  1903.  (See  Supplement.) 
The  procedure  to  be  designated  a  reserve  city  is,  in  brief,  for  each 
bank  which  wishes  to  join  in  the  application,  to  authorize  by 
resolution  of  its  directors,  some  officer  of  the  bank,  generally  the 
president  or  cashier,  to  sign  the  name  of  the  bank  to  the  petition 
addressed  to  the  Comptroller  of  the  Currency.  Blank  forms  for  the 
resolution  of  the  directors  and  blank  forms  of  petition  are  furnished 
by  the  Comptroller  of  the  Currency.  (For  form  of  application,  see 
page  273.     For  list  of  reserve  cities,  see  Supplement.) 


1 87 

ao4.     i?.equirements  To  Become  a  Central  Reserve  City. 

Seci'ION  2. — That  whenever  three-fourths  in  number  of  the  National 
banks  located  in  any  city  of  the  United  States  having  a  population  of  two 
hundred  thousand  people  shall  make  application  to  the  Comptroller  of  the 
Currency,  in  writing,  asking  that  such  city  may  be  a  central  reserve  city, 
like  the  city  of  New  York,  in  which  one-half  of  the  lawful  money  reserve  of 
the  National  banks  located  in  other  reserve  cities  may  be  deposited,  as  pro- 
vided in  section  fifty-one  hundred  and  ninety-five  of  the  Revised  Statutes, 
the  Comptroller  shall  have  authority,  with  the  approval  of  the  Secretary  of 
the  Treasury,  to  grant  such  request,  and  every  bank  located  in  such  city 
shall  at  all  times  thereafter  have  on  hand,  in  lawful  money  of  the  United 
States,  twenty-five  per  centum  of  its  deposits,  as  provided  »n  section  fifty-one 
hundred  and  ninety-one  of  the  Revised  Statutes. 

Under  this  act  Chicago  and  St.  Louis  have  been  made  central 
reserve  cities.  The  procedure  is  substantially  the  same  as  in  the  case 
of  the  designation  of  a  reserve  city.     (For  forms,  see  page  273.) 

305.    Redemption  of  United  States  Notes  at  San  Francisco. 

Section  3. — That  section  three  of  the  Act  of  January  fourteenth,  eighteen 
hundred  and  seventy-five,  entitled  "An  Act  to  provide  for  the  resumption  of 
specie  payments,"  be,  and  the  same  is  hereby,  amended  by  adding,  after  the 
words  "  Ne\V  York,"  the  words  "and  the  city  of  San  Francisco,  California." 

This  section  permits  legal-tender  notes  presented  in  sums  of  not 
less  than  fifty  dollars  at  the  sub  treasury  at  San  Francisco  to  be 
redeemed  there  in  coin,  which  by  Section  12  of  the  Act  of  June  12, 
1882,  is  interpreted  to  mean  gold  coin. 

206.    Jurisdiction  of  United   States  Courts  in  Suits  by  and  against 

National  Banks. 

Extract  from  an  Act  Approved  August  13,  1888. 
Section  4. — That  all  National  banking  associations  established  under  the 
laws  of  the  United  Slates  shall,  for  the  purposes  of  all  actions  by  or  against 
them,  real,  personal,  or  mixed,  and  all  suits  in  equity,  be  deemed  citizens  of 
the  States  in  which  they  are  respectively  located ;  and  in  such  cases  the  cir- 
cuit and  district  courts  shall  not  have  jurisdiction  other  than  such  as  they 
would  have  in  cases  between  individual  citizens  of  the  same  State.  The 
provisions  of  this  section  shall  not  be  held  to  affect  the  jurisdiction  of  the 
courts  of  the  United  States  in  cases  commenced  by  the  United  States  or  by 
direction  of  an  officer  thereof,  or  cases  for  winding  up  the  affairs  of  any  such 
bank. 

This  section  is  in  substance  a  re-enactment  of  the  proviso  to 
Section  4  of  the  Act  of  July  12,  1882,  (par.   184.)     The  effect  of 


1 88 

these  enactments  is  to  repeal  the  tenth  subdivision  of  Sec.  629 
Rev.  Stat.  U.  S.,  which  confers  upon  the  Circuit  Court  of  the 
United  States  jurisdiction  of  all  suits  by  or  against  any  National 
banking  association  established  in  the  District  for  which  the  court 
is  held.  (National  Bank  of  Jefferson  ^^  Fare,  25  Fed.  Rep.  200). 
The  change  in  the  law  affects  only  suits  brought  after  the  passage 
of  these  enactments.  (First  National  Bank  v.  Morgan,  132  U.  S., 
141.)  National  banks  are  now  on  preciseh^  the  same  footing  as 
individual  or  other  corporations  with  respect  to  the  right  to  sue  or 
be  sued  in  the  Federal  courts.  (Peter  v.  Commercial  National 
Bank,  142  U.  S.,  614.)  And  now  a  cause  in  which  a  National  bank 
is  a  party  defendant  cannot  be  removed  into  a  Federal  court  on  the 
mere  ground  that  the  defendant  is  a  National  bank.  (Leather 
Manufacturers'  National  Bank  z-.  Cooper,  120  U.  S.,  778  ;  Wichita 
National  Bank  v.  Smith.  36  U.  S.  App.,  530).  And  a  Receiver  of 
the  bank  who  is  substituted  as  a  party  in  place  of  the  bank  has  no 
greater  rights  in  this  respect  than  the  bank  itself.  (Wichita 
National  Bank  of  Wichita  v.  Smith,  supra).  The  assets  of  an  in- 
solvent National  bank  are  not  brought  under  the  control  or  protec- 
tion of  the  Federal  courts  by  being  taken  into  custody  by  a  Receiver 
appointed  by  the  Comptroller  of  the  Currency,  nor  by  the  transfer 
of  such  assets  from  the  Receiver  to  an  agent  of  the  stockholders. 
(Snohomish  County  v.  Puget  Sound  National  Bank  of  Everett, 
81  Fed.  Rep.,  518.) 

Federal  Questions — Diverse  Citizenship. — But  these  enact- 
ments do  not  place  National  banks  under  any  disadvantage  with 
reference  to  raising  Federal  questions  in  Federal  courts.  (Walker 
V.  Windsor  National  Bank,  56  Fed.  Rep.,  76  )  Thus,  a  suit  upon 
the  bond  of  the  cashier  of  a  National  bank  is  a  suit  ' '  arising  under 
the  laws  of  the  United  States,"  and  is  therefore  within  the  juris- 
diction of  the  Federal  courts  regardless  of  the  residence  of  the 
parties.  {Id.")  So,  the  United  States  Circuit  Court  has  jurisdic- 
tion of  a  suit  brought  against  a  director  for  negligent  performance 
of  his  duties ;  for,  as  such  suits  rest  upon  the  requirements  of  the 
United  States  laws  and  by-laws  made  pursuant  thereto,  it  is  a  case 
arising  under  the  laws  of  the  United  States.  (Witters  v.  Foster, 
28  Fed.  Rep.,  737.)  And  so,  a  suit  against  the  receiver  of  a 
National  bank  to  compel  him  to  pay  out  of  the  funds  in  his  hands 
as  receiver  moneys  claimed  by  the  complainant  is  a  suit  arising 
under  the  laws  of  the  United  States,  and  can  be  removed  into  the 


1 89 

Federal  court.  (Hot  Springs  Independent  School  District,  etc., 
V.  First  National  Bank  of  Hot  vSprings,  6i  Fed.  Rep.,  417.  j  When 
a  State  bank  acting  under  a  statute  of  the  State  calls  in  its  circu- 
lation issued  under  State  laws,  and  becomes  a  National  bank 
under  the  laws  of  the  United  States,  and  a  judgment  is  recovered 
in  a  court  of  a  State  against  the  National  bank  upon  such  out- 
standing circulation,  the  defense  of  the  State  statute  of  limitations 
having  been  set  up,  a  Federal  question  arises  which  may  give  the 
Supreme  Court  of  the  United  States  jurisdiction  in  error.  (Metro- 
politan National  Bank  v.  Claggett,  141  U.  S.,  520.)  So,  that  court 
has  jurisdiction  to  review  a  judgment  in  State  courts  involving 
the  question  whether  a  National  bank  is  exempted  from  liability 
to  account  for  bonds  purchased  by  it  on  condition  of  selling  back  on 
demand.  (Logan  Bank  v.  Townsend,  139  U.  S.,  67.)  The  Federal 
courts  have  jurisdiction  of  an  action  between  a  National  bank 
located  in  one  State  and  a  citizen  of  another  State.  (First  National 
Bank  v.  Forest,  40  Fed.  Rep.,  705.)  A  Federal  court  is  not  de- 
prived of  jurisdiction  otherwise  vested  in  it  of  a  suit  against  the 
executors  of  an  estate  by  the  fact  that  the  estate  is  in  the  posses- 
sion of  a  State  probate  court  for  purposes  of  administration,  and 
the  Federal  court  has  jurisdiction  to  adjudge  whether  a  liability 
exi.sts,  but  can  not  issue  execution  to  enforce  the  same.  (Wickham 
V.  Hull,  ef  a/.,  60  Fed.  Rep.,  326.) 

Actions  by  and  against  Receivers. — These  enactments  do  not 
affect  the  jurisdiction  of  the  Federal  courts  in  cases  of  action 
brought  for  winding  up  the  affairs  of  insolvent  National  banks ; 
and  the  receiver  may  bring  an  action  in  such  courts  to  collect  the 
assets  of  the  bank  without  regard  to  the  citizenship  of  the  parties. 
(Fi.sher  v.  Yoder,  53  Fed.  Rep.,  565;  Linn  County  National  Bank 
V.  Crawford,  69  Fed.  Rep.,  532;  Hendee  v.  Connecticut,  Etc.,  R. 
R.  Co.,  26  Fed.  Rep.,  677;  Burnham  v.  First  National  Bank,  53 
Fed.  Rep.,  163.)  But  the  United  States  Circuit  Court  has  not 
jurisdiction  of  a  suit  in  equity,  against  a  receiver  of  a  National 
bank  appointed  by  the  Comptroller  of  the  Currency,  where  the 
amount  in  controversy  is  less  than  $2,000.  (Smithson  v.  Hubbell, 
81  Fed.  Rep.,  593.)  And  in  a  suit  by  a  creditor  of  an  insolvent 
National  bank  in  behalf  of  himself  and  all  other  creditors  to 
enjoin  the  receiver  and  the  Comptroller  from  paying  dividends  on 
an  alleged  fraudulent  claim  which  has  been  allowed  by  them,  the 
jurisdictional  amount  is  to  be  determined  solely  by  the  amount  of 


190 

complainant's  own  claim,   and  not  by  the  aggregate  of  all  the 

claims  of  those  whom  he  assumes  to  represent,  or  by  the  amount 

of  the  dividends,  the  payment  of  which  is  sought  to  be  enjoined. 

{Id.) 

207.     Limitation  of  Banking  under  Territorial  Law. 

Extract  from  an  Act  approved  July  30,  1886. 

Section  5. — That  section  eighteen  hundred  and  eighty-nine,  title  twenty- 
three  of  the  Revised  Statutes  of  the  United  States  be  amended  and  read  as 
follows  : 

"  The  legislative  assemblies  of  the  several  Territories  shall  not  grant  private 
charters  or  special  privileges,  but  they  may,  by  general  incorporation  acts, 
permit  persons  to  associate  themselves  together  as  bodies  corporate  for 
mining,  manufacturing,  and  other  industrial  pursuits,  and  for  conducting  the 
business  of  insurance,  banks  of  discount  and  deposit  (but  not  of  issue),  loan, 
trust  and  guarantee  associations,  and  for  the  construction  or  operation  of  rail- 
roads, wagon-roads,  irrigating  ditches  and  the  colonization  and  improvements 
of  lands  in  connection  therewith,  or  for  colleges,  seminaries,  churches,  libra- 
lies,  or  any  other  benevolent,  charitable,  or  scientific  association." 

208.    National  Banks  in  Oklahoma. 

Extract  from  Act  of  May  2,  1890. 

Section  17. — That  the  provisions  of  title  sixty-two  of  the  Revised  Statutes 
of  the  United  States  relating  to  National  banks,  and  all  amendments  thereto, 
shall  have  the  same  force  and  effect  in  the  Territory  of  Oklahoma  as  else- 
where in  the  United  States :  Provided,  That  persons  otherwise  qualified  to 
act  as  directors  shall  not  be  required  to  have  resided  in  said  Territory  for 
more  frhan  three  months  immediately  preceding  their  election  as  such. 

209.    Deposits  to  Pay  Circulating  Notes  to  be  Covered  into  Treasury. 

Extract  from  Act  of  July  14,  1890. 

Section  6. — That  upon  the  passage  of  this  act  the  balances  standing  with 
the  Treasurer  of  the  United  States  to  the  respective  credits  of  National  banks 
for  deposits  made  to  redeem  the  circulating  notes  of  such  banks,  and  all 
deposits  thereafter  received  for  like  purpose,  shall  be  covered  into  the 
Treasury  as  a  miscellaneous  receipt,  and  the  Treasurer  of  the  United 
States  shall  redeem  from  the  general  cash  in  the  Treasury  the  circu- 
lating notes  of  said  banks  which  may  come  into  his  possession  subject  to 
redemption,  and  upon  the  certificate  of  the  Comptroller  of  the  Currency  that 
such  notes  have  been  received  by  him  and  that  they  have  been  destroyed 
and  that  no  new  notes  will  be  issued  in  their  place,  reimbursement  of  their 
amount  shall  be  made  to  the  Treasurer,  under  such  regulations  as  the  Secre- 
tary of  the  Treasury  may  prescribe,  from  an  appropriation  hereby  created, 
to  be  known  as  National  bank  notes  Redemption  account,  but  the  provi- 
sions of  this  act  shall  not  apply  to  the  deposits  received  under  section  three 


191 

of  the  Act  of  June  twentieth,  eighteen  hundrea  and  seventy-four,  requiring 
every  National  bank  to  keep  in  lawful  money  with  the  Treasurer  of  the 
United  States  a  sum  equal  to  five  per  centum  of  its  circulation,  to  be  held 
and  used  for  the  redemption  of  its  circulating  notes;  and  the  balance 
remaining  of  the  deposits  so  covered  shall,  at  the  close  of  each  month,  be 
reported  on  the  monthly  public  debt  statement,  as  debt  of  the  United  States 
bearing  no  interest. 

2IO.     Branch  Banks  at  World's  Eair. 

Extract  from  Act  of  May  12,  1892. 

That  any  National  bank  located  in  the  city  of  Chicago  and  State  of  Ilhnois 
may  be  designated  by  the  World's  Columbian  Exposition  to  conduct  a  bank- 
ing office  upon  the  exposition  grounds,  and  upon  such  designation  being 
approved  by  the  Comptroller  of  the  Currency,  said  bank  is  hereby  authorized 
to  open  and  conduct  such  office  as  a  branch  of  the  bank  subject  to  the  same 
restrictions,  and  having  the  same  rights  as  the  bank  to  which  it  belongs : 
Provided,  That  the  branch  office  authorized  hereby  shall  not  be  operated  for 
a  longer  period  than  two  years,  beginning  not  earlier  than  July  first,  eighteen 
hundred  and  ninety-two,  and  closing  not  later  than  July  first,  eighteen  hun- 
dred and  ninety-four, 

311.     National  Banks  Liable  for  Incomplete  Currency. 

Act  of  July  12,  1892. 

The  Act  of  July  28,  1892,  provides  that  the  provisions  of  the  Revised 
Statutes  of  the  United  States,  for  the  redemption  of  National  bank  notes, 
shall  apply  to  all  National  bank  notes  that  have  been  or  may  be  issued  to, 
or- received  by,  any  National  bank,  notwithstanding  such  notes  may  have 
been  lost  by  or  stolen  from  the  bank  and  put  in  circulation  without  the  signa- 
ture or  upon  the  forged  signature  of  the  president  or  vice-president  and 
cashier.* 

313.     Taxation  of  Legal  Tender  Notes  and  National  Bank  Notes. 

Act  approved  August  13,  1894. 

Section  i. — That  circulating  notes  of  National  banking  associations  and 
United  States  legal-tender  notes  and  other  notes  and  certificates  of  the  United 
States,  payable  on  demand  and  circulating  or  intended  to  circulate  as  cur- 
rency, and  gold,  silver,  or  other  coin  shall  be  subject  to  taxation  as  money  on 
hand  or  on  deposit  under  the  laws  of  any  State  or  Territory  :  proz'ided.  That 
any  such  taxation  shall  be  exercised  in  the  same  manner  and  at  the  same 
rate  that  any  such  State  or  Territory  shall  tax  money  or  currency  circulating 
as  money  within  its  jurisdiction. 

Section  2. — That  the  provisions  of  this  act  shall  not  be  deemed  or  held  to 


*  In  view  of  this  liability  it  is  hazardous  to  have  new  currency  sent  from  the 
Comptroller's  office  by  registered  mail  instead  of  by  express,  unless  insured. 


192 

change  existing  laws  in  respect  of  the  taxation  of  National  banking  asso- 
ciations. * 

313.     Insolvent  National  Bank  Agent  to  Manage  Distribution  of 

Assets. 
Act  of  March  2,  1897. 

That  section  three  of  an  Act  entitled  ''  An  Act  authorizing  the  appointment 
of  receivers  of  National  banks,  and  for  other  purposes,"  approved  June 
thirtieth,  eighteen  hundred  and  seventy-six,  as  amended  by  an  Act  approved 
August  third,  eighteen  hundred  and  ninety-two,  be  and  hereby  is,  amended 
so  as  to  read  as  follows  : 

"  Section  3  — That  whenever  any  association  shall  have  been  or  shall  be 
placed  in  the  hands  of  a  receiver,  as  provided  in  section  fifty-two  hundred 
and  thirty-four  and  other  sections  of  the  Revised  Statutes  of  the  United  States, 
and  when,  as  provided  in  section  fifty-two  hundred  and  thirty-six  thereof,  the 
Comptroller  of  the  Currency  shall  have  paid  to  each  and  every  creditor  of 
such  association,  not  including  shareholders  who  are  creditors  of  such  asso- 
ciation, whose  claim  or  claims  as  such  creditor  shall  have  been  proved  or 
allowed  as  therein  prescribed,  the  full  amount  of  such  claims,  and  all  expenses 
of  the  receivership  and  the  redemption  of  the  circulating  notes  of  such  asso- 
ciation shall  have  been  provided  for  by  depositing  lawful  money  of  the  United 
States  with  the  Treasurer  of  the  United  States,  the  Comptroller  of  the  Cur- 
rency shall  call  a  meeting  of  the  shareholders  of  such  association  by  giving 
notice  thereof  for  thirty  days  in  a  newspaper  published  in  the  town,  city,  or 
county  where  the  business  of  such  association  was  carried  on,  or  if  no  news- 
paper is  there  published,  in  the  newspaper  published  nearest  thereto.  At 
such  meeting  the  shareholders  shall  determine  whether  the  receiver  shall  be 
continued  and  shall  wind  up  the  affairs  of  such  association,  or  whether  an 
agent  shall  be  elected  for  that  purpose,  and  in  so  determining  the  said  share- 
holders shall  v.ote  by  ballot,  in  person  or  by  proxy,  each  share  of  stock 
entitling  the  holder  to  one  vote,  and  the  majority  of  the  stock  in  value  and 
number  of  shares  shall  be  necessary  to  determine  whether  the  said  receiver 
shall  be  continued,  or  whether  an  agent  shall  be  elected.  In  case  such 
majority  shall  determine  that  the  said  receiver  shall  be  continued,  the  said 
receiver  shall  thereupon  proceed  with  the  execution  of  his  trust,  and  shall  sell, 
dispose  of,  or  otherwise  collect  the  assets  of  the  said  association,  and  shall 
possess  all  the  powers  and  authority,  and  be  subject  to  all  the  duties  and  lia- 
bihties  originally  conferred  or  imposed  upon  him  by  his  appointment  as  such 
receiver,  so  far  as  the  same  remain  applicable.  In  case  the  said  meeting 
shall,  by  the  vote  of  a  majority  of  the  stock  in  value  and  number  of  shares, 
determine  that  an  agent  shall  be  elected,  the  said  meeting  shall  thereupon 
proceed  to  elect  an  agent,  voting  by  ballot,  in  person  or  by  proxy,  each  share 


*  Prior  to  the  passage  of  this  statute  there  was  some  doubt  as  to  whether  the 
State  could  tax  the  circulating  notes  of  the  National  banks,  and  the  authori- 
ties on  the  point  were  in  conflict.  (See  note  to  Sec.  5219,  Rev.  Stat.  U.  S., 
par.  95. 


193 

of  stock  entitling  the  holder  to  one  vote,  and  the  person  who  shall  receive 
votes  representing  at  least  a  majority  of  stock  in  value  and  number  shall  be 
declared  the  agent  for  the  purposes  hereinafter  provided  ;  and  whenever  any 
of  the  shareholders  of  the  association  shall,  after  the  election  of  such  agent, 
have  executed  and  filed  a  bond  to  the  satisfaction  of  the  Comptroller  of  the 
Currency,  conditioned  for  the  payment  and  discharge  in  full  of  each  and 
every  claim  that  may  thereafter  be  proved  and  allowed  by  and  before  a  com- 
petent court,  and  for  the  faithful  performance  of  all  and  singular  the  duties 
of  such  trust,  the  Comptroller  and  the  receiver  shall  thereupon  transfer  and 
dehyer  to  such  agent  all  the  undivided  or  uncollected  or  other  assets  'ot 
such  association  then  remaining  in  the  hands  or  subject  to  the  order  and 
control  of  said  Comptroller  and  said  receiver,  or  either  of  them ;  and  for  this 
purpose  said  Comptroller  and  said  receiver  are  hereby  severally  empowered 
and  directed  to  execute  any  deed,  assignment,  transfer,  or  other  instrument 
in  writing  that  may  be  necessary  and  proper;  and  upon  the  execution  and 
delivery  of  such  instrument  to  the  said  agent  the  said  Comptroller  and  the 
said  receiver  shall  by  virtue  of  this  act  be  discharged  from  any  and  all  liabili- 
ties to  such  association  and  to  each  and  all  the  creditors  and  shareholders 
thereof.  Upon  receiving  such  deed,  assignment,  transfer,  or  other  instru- 
ment the  person  elected  such  agent  shall  hold,  control,  and  dispose  of  the 
assets  and  property  of  such  associadon  which  he  may  receive  under  the 
terms  hereof  for  the  benefit  of  the  shareholders  of  such  association,  and  he 
may  in  his  own  name,  or  in  the  name  of  such  association,  sue  and  be  sued 
and  do  all  other  lawful  acts  and  things  necessary  to  finally  settle  and  distri- 
bute the  assets  and  property  in  his  hands,  and  may  sell,  compromise,  or 
compound  the  debts  due  to  such  association,  with  the  consent  and  approval 
of  the  circuit  or  district  court  of  the  United  States  for  the  district  where 
the  business  of  such  association  was  carried  on,  and  shall  at  the  conclusion 
of  his  trust  render  to  such  district  or  circuit  court  a  full  account  of  all  his  pro 
ceedings,  receipts,  and  expenditures  as  such  agent,  which  court  shall,  upon 
due  notice,  settle  and  adjust  such  accounts  and  discharge  said  agent  and  the 
sureties  upon  said  bond.  And  in  case  any  such  agent  so  elected  shall  refuse 
to  serve,  or  die,  resign,  or  be  removed,  any  shareholder  may  call  a  meeting 
of  the  shareholders  of  such  association  in  the  town,  city,  or  village  where  the 
business  of  the  said  association  was  carried  on,  by  giving  notice  thereof  for 
thirty  days  in  a  newspaper  published  in  said  town,  city,  or  village,  or  if  no 
newspaper  is  there  published,  in  the  newspaper  published  nearest  thereto,  at 
which  meeting  the  shareholders  shall  elect  an  agent,  voting  by  ballot,  m  per- 
son or  by  proxy,  each  share  of  stock  entitling  the  holder  to  one  vote,  and 
when  such  agent  shall  have  received  votes  representing  at  least  a  maionty  of 
the  stock  in  value  and  number  of  shares,  and  shall  have  executed  a  bond  to 
the  shareholders  conditioned  for  the  faithful  performance  of  his  duties,  in  the 
penalty  fixed  by  the  shareholders  at  said  meeting,  with  two  sureties,  to  be 
approved  by  a  judge  of  a  court  of  record,  and  file  said  bond  in  the  office  of 
the  clerk  of  a  court  of  record  in  the  county  where  the  busmess  of  said  asso- 
ciation was  carried  on,  he  shall  have  all  the  rights,  powers,  and  duties  of  the 
13 


194 

a.gev.1  first  elected  as  hereinbefore  provided.  At  any  meeting  held  as  herein- 
before provided  administrators  or  executors  of  deceased  shareholders  may 
act  and  sign  as  the  decedent  miglit  have  done  if  living,  and  guardians  of 
minors  and  trustees  of  other  persons  may  so  act  and  sign  for  their  ward  or 
wards  or  cestui  que  trust.  The  proceeds  of  the  assets  or  property  of  any  such 
association  which  may  be  undisturbed  at  the  time  of  such  meeting  or  may  be 
subsequently  received  shall  be  distributed  as  follows  : 

"/'7ri/.  To  pay  the  expenses  of  the  execution  of  the  trust  to  the  date  of 
such  payment. 

"Second.  To  repay  any  amount  or  amounts  which  have  been  paid  in  by 
any  shareholder  or  shareholders  of  such  association  upon  and  by  reason  of 
any  and  all  assessments  made  upon  the  stock  of  such  association  by  the 
order  of  the  Comptroller  of  the  Currency  in  accordance  with  the  provisions  of 
the  Statutes  of  the  United  States  ;  and. 

"  IViird.  The  balance  ratably  among  such  stockholders,  in  proportion  to 
the  number  of  shares  held  and  owned  by  each.  Such  distribution  shall  be 
made  from  time  to  time  as  the  proceeds  shall  be  received  and  as  shall  be 
deemed  advisable  by  the  said  Comptroller  or  said  agent." 

Approved  March  2,  1897. 

214.    Legal  Tender  and  Lawful  Money. 

The  following  statement  concerning  the  legal-tender  properties 
of  money  of  the  United  States  is  based  upon  United  States  Re- 
vised Statutes,  Sections  3585,  3586,  3587,  3588,  3589,  and  3590, 
and  the  acts  amendatory  thereof  and  additional  thereto: 

Gold  coin,  standard  silver  dollars,  subsidiary  silver,  minor  coins. 
United  States  notes,  and  Treasury  notes  of  1890  have  the  legal-tender 
quality  as  follows :  Gold  coin  is  legal  tender  for  its  nominal  value 
when  not  below  the  limit  of  tolerance  in  weight ;  when  below  that 
limit  it  is  legal  tender  in  proportion  to  its  weight ;  standard  silver 
dollars  and  Treasury  notes  of  1890  are  legal  tender  for  all  debts,  pub- 
lic and  private,  except  where  otherwise  expressly  stipulated  in  the 
contract ;  subsidiary  silver  is  legal  tender  to  the  extent  of  $10.  minor 
coins  to  the  extent  of  25  cents,  and  United  States  notes  for  all  debts, 
public  and  private,  except  duties  on  imports  and  interest  on  the  pub- 
lic debt.  Gold  certificates,  silver  certificates,  and  National  bank 
notes  are  nonlegal-tender  money.  Both  kinds  of  certificates,  how- 
ever, are  receivable  for  all  public  dues,  and  National  bank  notes  are 
receivable  for  all  public  dues  except  duties  on  imports,  and  may  be 
paid  out  for  all  public  dues,  except  interest  on  the  public  debt. 

The  term  "  lawful  money  *'  is  understood  to  apply  to  every  form 
of  monej'  which  is  endowed  by  law  with  the  legal-tender  quality. 
(See  Opinions  of  Attorneys-General,  vol.  17,  p    T23.) 


PART    SECOND. 

ORGANIZING  NATIONAL  BANKS.— BY-LA V/S,  MANAGEMENT. 

VOLUNTARY   LIQUIDATION,   EXTENDING   CHARTER.— 

U.  S.   DEPOSITARIES, 


CHAPTER   I. 


ORGANIZING.*— BY-LAWS.— MANAGEMENT. 


ORGANIZATION   DE  NOVO. 

The  Subscription  Paper. — The  law  requires  no  preliminary 
subscription  for  the  stock  of  the  proposed  bank,  though  such  sub- 
scription is  frequently  the  means  of  greatl)^  facilitating  the  organ- 
ization. By  it  the  persons  are  brought  together  in  a  mutual 
contract,  and  are  thus  enabled  to  more  conveniently  determine  the 
matters  preliminary  to  the  organization  of  the  bank,  as,  for 
instance,  what  provisions  the  articles  of  association  shall  contain  ; 
who  shall  be  named  as  the  first  directors  of  the  bank  ;  where  the 
banking  house  shall  be  located,  and  many  other  details  of  more  or 
less  importance.  As  these  are  matters  about  which  there  may  be 
great  difference  of  opinion,  to  postpone  their  determination  until 
the  articles  of  association  are  presented  for  signature  to  the  various 
persons  who  are  to  become  corporators,  often  causes  confusion  and 
delay.  Also,  if  there  are  to  be  many  shareholders,  it  is  desirable 
for  many  reasons  that  the  exact  number  of  shares  which  each  is 
to  have,  should  be  known  at  the  time  that  the  articles  are  signed. 
Again,  it  frequentl}'  happens  that  persons  are  willing  to  become 
shareholders  in  the  bank  only  upon  prescribed  conditions,  viz.  .• 
that  a  certain  man  shall  be  president ;  that  the  banking  house  shall 
be  located  on  a  certain  street,  etc. ;  and  where  this  is  the  case  the 

chances  of  misunderstandings  and  fuf.ure  disagreements  are  very 

— — — 1 

*  The  Comptroller  of  the  Cvrrency  requires  that  National  banks  use  only 
the  printed  forms  furnished  by  his  office.  Written  forms  servt  by  the  banks 
will  not  be  accepted. 

I9S 


196 

materially  lessened  if  the  conditious  are  plainly  set  forth  in  a 
subscription  paper. 

But  the  signing  of  the  subscription  paper  does  not  constitute  one 
a  member  of  the  corporation  which  is  afterwards  formed;  and 
should  the  other  subscribers  refuse  to  admit  him  to  participation 
in  the  organization,  he  would  have  only  an  action  for  damages. 
But  when  requested  to  do  so,  by  those  having  charge  of  matters, 
each  subscriber  would  be  bound  to  execute  all  the  instruments, 
which  it  is  necessary  that  the  corporators  should  execute,  for  the 
formation  of  the  corporation.  And  should  any  subscriber  refuse 
to  execute  these  instruments,  and  his  refusal  have  the  effect 
of  preventing  an  organization,  or  greatly  delay  it,  a  court 
of  competent  jurisdiction  might,  upon  petition  of  the  other  sub- 
scribers, decree  specific  performance.  (See  L^indley  on  Partnership, 
p.  925,  and  cases  there  cited.)  ' 

Form  of  Subscription  Paper. 

We  whose  names  are  hereunto  signed,  do  hereby  subscribe,  in  the  propor- 
tions hereinafter  set  opposite  our  respective  names,  for  the  stock  of  a  National 
banking  association  to  be  organized  under  the  laws  of  the  United  States 

with  a  capital  stock  of thousand  dollars,  divided  into shares, 

of  the  par  value  of  one  hundred  dollars  each,  the  said  National  banking 

association  to  be  located  in  the of ,  State  of ,  and  to  be 

called  "The ." 


Names. 


Shares. 


Notice  to  the  Comptroller  of  the  Currency. — When  the 
promoters  have  fixed  upon  a  name  for  the  bank,  the  Comptroller 
should  be  notified,  his  approval  of  title  selected  being  necessary 
(Sec.  5134  R.  S.).  The  notice  should  be  signed  by  at  least  five  sub- 
scribers to  the  stock ,  giving  places  of  residence,  and  reading  as  follows : 

Sir  :  Notice  is  hereby  given  that  we,  the  undersigned,  being  natural  persons 
»nd  of  lawful  age,  intend,  with  others,  to  organize  a  National  banking  associa- 
tion, under  the  title  of  "The ,"  to  be  located  at ,  county  of , 

State  of ,  with  a  capital  of  $ . 

In  order  that  we  may  effect  such  organization,  we  request  that  proper  blank 

forms  be  sent  to ,  at ,  and,  if  the  title  selected  shall  be  approved, 

that  it  be  reserved  for  us  for  the  period  of  sixty  days. 

Note. — The  minimum  capital  required  in  places  exceeding  50,000  popula- 
tion is  $200,000,  in  other  places,  |ioo,ooo,  excepting  that  with  the  approval  of 
the  Secretary  of  the  Treasury,  in  places  of  6.000  population  or  less,  banks  with 
1150,000  capital  may  be  organized,  and  where  the  population  does  not  exceed 
j,ooo,  with  las.ooo  capital.     (See  Section  5138  R.  S.  and  Act  March  14,  1900.) 


197 

Good  Faith  of  Parties  Must  be  Vouched  For. — On  the  re- 
verse side  of  the  form  above  mentioned  is  given  a  blank  for  a 
statement  as  to  the  business  of  each  of  the  applicants  and  their 
financial  strength.  Also  a  blank  for  a  statement  by  some  public 
official  acquainted  with  the  parties,  that  the  information  is  in  his 
opinion  correct,  and  that  the  parties  are  acting  in  good  faith. 

Practice  of  Comptroller  to  Reserve  Title. — It  is  the  practice 
of  the  Comptroller  of  the  Currency,  when  such  a  notice,  properly 
endorsed,  is  received,  to  reserve  for  the  parties,  for  a  reasonable  time, 
the  title  selected.  Usually  this  time  is  sixty  days,  but  extension 
is  sometimes  granted  by  the  Comptroller  under  certain  circum- 
stances. 

The   Form  of  Title. — The  name  of  the   place  in   which  the 
b^nk  is  to  be  located  must  constitute  a  part  of  the  title.     For  ex- 
ample, "The  Exchange  National  Bank  of  Omaha."     If  the  name 
of  the   place   is   .selected   as  the  distinguishing  part  of  the  title, 
it   must  not  also  be  added.       Thus,    if  the  title  is  to  be   "The 
Omaha   National  Bank,"   the  words   "of  Omaha"   must    not  be 
added.       They  would   be  entirely  superfluous  and  make  the  title 
inelegant.     The  addition  of  the  name  of  the  State  is  prohibited, 
because  a  title  in  such  form  has  an  awkward  appearance  upon  the 
circulating  notes.     It  is  best  to  make  the  title  brief,  not  using  a 
long  name   or  compound  word   as  the  distinguishing  part,  also 
avoiding   the   use   of  all   superfluous   words.     E.g.,   "The  Na- 
tional  Susquehanna-River   Bank,    of    the   Q\\.y   of    Harrisburg " 
would  be  too  much  of  a  title. 

The  title  "The  First  National  Bank  "  will  not  be  granted  in  a 
place  where  another  National  Bank  has  ever  been  organized,  whe- 
ther still  in  existence  or  not. 

Corporators  Must  Be  Natural  Persons. — The  corporators 
must  be  natural  persons  (Section  5133,  Revised  Statutes)— ^hat  is, 
human  beings,  as  distinguished  from  artificial  beings  which 
exist  only  in  contemplation  of  law,  such  as  corporations  and  joint- 
stock  companies.  The  reason  for  excluding  these  merely  lega  enti- 
ties is  obvious.  Such  powers  as  they  have  are  limited,  and  in 
most  cases  they  are  not  authorized  to  become  corporators  of  another 
artificial  being,  and  their  participation  in  the  organization  might 
give  rise  to  questions  afiecting  its  validity.  Partnerships,  equally 
with  corporations,  are  excluded  under  the  terms  of  the  statute. 


igS 

If  a  firm  desires  to  take  any  of  the  stock,  this  should  be  done  by 
one  of  the  partners  in  his  individual  capacity,  until  after  the  cor- 
poration is  formed,  when  the  stock  can  be  transferred  to  the  firm 
name.  . 

Married  "Women  as  Corporators. — Whether  a  married  wo- 
man can  be  a  corporator,  will  depend  upon  the  law  of  the  State  in 
which  she  resides  and  where  the  bank  is  to  be  located.  If  by 
the  State  law  she  is  authorized  to  make  a  contract  of  this  kind, 
and  has  the  capacity  to  bind  herself  to  all  the  liabilities  and 
obligations  of  a  shareholder,  there  is  no  reason  why  she  should 
not  participate  in  forming  the  corporation.  But  as  a  general  rule, 
it  is  better  that  any  of  the  corporators  who  are  women  should  be 
unmarried ;  and  it  is  only  where  the  legal  capacity  of  married 
women,  to  be  parties  to  the  organization,  is  perfectly  clear,  that  they 
should  ever  be  made  such.  Whenever  there  is  any  doubt  in  regard 
to  this,  stock  intended  for  a  married  woman  should  be  taken  in  the 
name  of  some  other  person  fully  qualified  to  be  a  corporator  and 
afterward  assigned  to  her. 

Infant  Can  Not  Be  Corporator. — An  infant — that  is,  a  per- 
son under  legal  age — should  never  be  allowed  to  become  a  corpo- 
rator, for  his  contract  would  not  be  binding  and  he  could  repudiate 
it  upon  becoming  of  age. 

Articles  of  Association. — This  is  the  first  instrument  to  be 
executed,  and  it  is  required  (Section  5133,  R.  S.*)  that  these  articles 
' '  shall  specify  in  general  terms,  the  object  for  which  the  association 
is  formed,  and  may  contain  any  other  provisions  not  inconsistent 
with  law  which  the  association  may  see  fit  to  adopt  for  the  regula- 
tion of  its  business  and  conduct  of  its  affairs." 

The  following  is  the  form  furnished  by  the  Comptroller : 

Articles  of  Association. 

For  the  purpose  of  organizing  an  association  to  carry  on  the  business  of 
banking,  under  the  laws  of  the  United  States,  the  undersigned  subscribers  for 
the  stock  of  the  association  hereinafter  named  do  enter  into  the  following 
articles  of  association  : 

First.  The  name  and  title  of  this  association  shall  be  "  The ."  f 


*  Sections  of  the  Revised  Statutes  referred  to  are  given  in  Part  I  of  this  work, 
t  Give  title  exactly  as  approved  by  Comptroller.    Do  not  abbreviate  or  add 
name  of  State. 


199 

Second.  The  place  where  its  banking  house  or  office  shall  be  located  and 
Us  operations  of  discount  and  deposit  carried  on  and  its  general  business  con- 
ducted shall  be . 

Third.  The  board  of  directors  shall  consist  of* shareholders.    The 

first  meeting  of  the  shareholders  for  the  election  of  directors  shall  be  held 

at ,  on  the ,  or  at  such  other  place  and  time  as  a  majority  of  the 

undersigned  shareholders  may  direct. 

Fourth.  The  regular  annual  meetings  of  the  shareholders  for  the  election 
of  directors  shall  be  held  at  the  banking  house  of  this  association  on  the 
second  Tuesdayfof  January  of  each  year ;  but  if  no  election  shall  be  held 
on  that  day,  it  may  be  held  on  any  other  day,  according  to  the  provisions  of 
section  5149  of  the  Revised  Statutes  of  the  United  States;  and  all  elections 
shall  be  held  according  to  such  regulations  as  may  be  prescribed  by  the 
board  of  directors,  and  not  inconsistent  with  the  provisions  of  the  National 
banking  law  and  of  these  articles. 

Fifth.  The  capital  stock  of  this  association  shall  be thousand  dollars, 

to  be  divided  into  shares  of  one  hundred  dollars  each  ;  but  the  capital  may, 
with  the  approval  of  the  Comptroller  of  the  Currency,  be  increased  at  any 
lime  by  shareholders  owning  two-thirds  of  the  stock,  according  to  the  pro- 
visions of  an  act  of  Congress  approved  May  i,  1886;  and  in  case  of  the 
increase  of  the  capital  of  the  association,  each  shareholder  shall  have  the 
privilege  of  subscribing  for  such  number  of  shares  of  the  proposed  increase 
of  the  capital  stock  as  he  may  be  entitled  to  according  to  the  number  of 
shares  owned  by  him  before  the  stock  is  increased.  , 

Sixth.  The  board  of  directors,  a  majority  of  whom  shall  be  a  quorum  to  do 
business,  shall  elect  one  of  its  members  president  of  this  association,  who 
shall  hold  his  office  (unless  he  shall  be  disqualified,  or  be  sooner  removed  by 
a  two-thirds'  vote  of  all  the  members  of  the  board),  for  the  term  for  which  he 
was  elected  a  director ;  the  directors  shall  have  power  to  elect  a  vice-presi- 
dent, who  shall  also  be  a  member  of  the  board  of  directors,  and  who  shall 
be  authorized,  in  the  absence  or  inability  of  the  president  from  any  cause,  to 
perform  all  acts  and  duties  pertaining  to  the  office  of  president  except  such 
as  the  president  only  is  authorized  by  law  to  perform ;  and  to  elect  or  appoint 
a  cashier  and  such  other  officers  and  clerks  as  may  be  required  to  transact 
the  business  of  the  association,  to  fix  the  salaries  to  be  paid  to  them,  and 
continue  them  in  office,  or  to  dismiss  them,  as  in  the  opinion  of  a  majority  of 
the  board  the  interests  of  the  association  may  demand. 

The  directors  shall  have  power  to  define  the  duties  of  the  officers  and  clerks 
of  the  association,  to  require  bonds  from  them  and  to  fix  the  penalty  thereof; 

*  It  is  well  to  have  article  three  read,  "  the  board  of  directors  shall  consist  of 

not  less  than  five  nor  more  than [fix  limit]  shareholders,"  then  the  number 

can  be  changed  within  that  limit  at  any  annual  meeting,  without  amending  the 
articles.  The  number  elected  constitutes  the  board  for  the  year,  but  should  the 
bank's  interests  specially  require  an  increase  in  directors,  the  Comptroller  may 
give  his  consent.     Then  it  will  be  necessary  to  amend  article  three  to  read: 

"  The  board  of  directors  shall  consist  of [number  desired]  shareholders," 

and  at  next  annual  meeting  a  sliding  scale  can  be  readopted  if  desired. 

t  Tuesday  is  optional.     See  section  5145  R.  S. 


200 

to  regulate  the  manner  in  which  elections  of  directors  shall  be  held,  and  to 
appoint  judges  of  the  elections;  to  make  all  by-laws  that  it  may  be  proper 
for  them  to  make,  not  inconsistent  with  law,  for  the  general  regulation  of  the 
business  of  the  association  and  the  management  of  its  affairs ;  and,  gener- 
ally, to  do  and  perform  all  acts  that  it  may  be  legal  for  a  board  of  directors 
to  do  and  perform,  under  the  Revised  Statutes  aforesaid. 

Seventh.  This  association  shall  continue  for  the  period  of  twenty  years 
from  the  date  of  the  execution  of  its  organization  certificate,  unless  sooner 
placed  in  voluntary  liquidation  by  the  act  of  its  shareholders  owning  at  least 
two-thirds  of  its  stock,  or  otherwise  dissolved  by  authority  of  law. 

Eighth.  These  articles  of  association  may  be  changed  or  amended  at  any 
time  by  shareholders  owning  a  majority  of  the  stock  of  the  association  in  any 
manner  not  inconsistent  with  law ;  and  the  board  of  directors,  or  any  three 
shareholders,  may  call  a  meeting  of  the  shareholders  for  this  or  any  other 
purpose,  not  inconsistent  with  law,  by  publishing  notice  thereof  for  thirty 
days  in  a  newspaper  published  in  the  town,  city,  or  county  where  the  bank  is 
located,  or  by  mailing  to  each  shareholder  notice  in  writing  thirty  days  before 
the  time  fixed  for  the  meeting. 

In  witness  whereof  we  have  hereunto  set  our  hands  this day  of , 

nineteen  hundred  and . 

[Signatures  of  corporators, 

and  there  must  be  at  least  five.  ] 

I  certify  that  the  articles  of  association  of  the are  executed  in  dupli- 
cate, and  that  one  of  the  instruments  so  executed  is  the  foregoing ;  and  that 
the  other,  in  all  respects  like  the  foregoing,  is  on  file  with  said  bank. 

,  Cashier  or  President. 

, ,  19—. 

This  form  may,  of  course,  be  varied  to  meet  the  views  of  the 
corporators,  and  any  provisions  may  be  inserted  which  are  not 
inconsistent  with  the  National  banking  laws,  but  it  is  advisable 
for  many  reasons  to  use  the  form  provided  by  the  Comptroller  of 
the  Currency. 

Naming  Directors  in  Articles. — Instead  of  providing,  as  in 
the  form  given  (Article  3),  for  a  meeting  of  shareholders  to  elect 
directors,  the  incorporators  may,  if  they  choose,  designate  in  the 
articles  the  persons  who  shall  constitute  the  first  board  of  directors. 
In  this  event  the  following  should  be  substituted  for  the  third 
article  in  the  preceding  form,  and  the  other  stricken  out : 

The  board  of  directors  shall  consist  of stockholders,  and  the  follow. 

ing  persons  [here  insert  names]  have  been  duly  elected  directors  of  this  asso. 
ciation,  to  hold  their  offices  as  such  until  the  regular  annual  election  takes 
place,  pursuant  to  the  fourth  article  of  these  articles  of  association,  and  until 
their  successors  are  chosen  and  have  qualified. 


20I 

Not  Necessary  to  Provide  for  Increasing  Capital  Stock. — 
It  was  once  necessary  to  provide  in  the  articles  of  association  for 
an  increase  of  the  capital  stock  (Section  5142,  Revised  Statutes), 
but  such  a  provision  is  no  longer  of  any  use,  for  the  Act  of  May  i . 
1886,  authorizes  shareholders  owning  two-thirds  of  the  shares, 
with  the  approval  of  the  Comptroller,  to  increase  the  capital  stock 
at  any  time  and  to  any  amount. 

Provision  for  Lien  on  Stock  Invalid. — Formerly  it  appears 
to  have  been  not  unusual,  for  the  persons  forming  the  association, 
to  incorporate  in  either  the  articles  of  association  or  the  by-laws, 
a  provision  to  the  effect  that  no  shareholder,  when  indebted,  either 
directly  or  indirectly,  to  the  bank,  should  transfer  his  stock  with- 
out the  consent  of  the  directors.  This  is  a  very  common  provision 
in  the  articles  of  association  and  by-laws  of  other  than  National 
banks  and  of  moneyed  corporations  generally,  and  is,  no  doubt, 
an  excellent  one  where  the  policy  of  the  law  admits  of  it.  But 
the  Supreme  Court  of  the  United  States  has  held  that  any  such 
regulation  adopted  by  a  National  bank  is  void,  because  the  bank 
would  thus  acquire  an  interest  in  its  own  stock  in  violation  of  Sec- 
tion 5201,  Revised  Statutes.     (Bank  v.  Lanier,  11  Wall.,  369.) 

Signing  the  Articles. — It  is  unnecessary  for  more  than  five 
of  the  subscribers  to  the  capital  stock,  to  sign  the  articles  of 
association. 

Should  Be  Executed  in  Duplicate. — The  law  requires  that 
a  copy  of  the  articles  of  association  shall  be  filed  in  the  oflSce  of 
the  Comptroller  of  the  Currency.  It  often  happens  that  the 
original  articles,  in  the  possession  of  the  bank  are  lost  or  destroyed. 
For  this  reason  it  has  become  the  practice  to  execute  them  in 
duplicate,  and  to  file  with  the  Comptroller  one  of  these  instead  of 
a  copy. 

The  Organization  Certificate, — The  next  thing  to  do  is  to 
make  an  organization  certificate.  The  matters  to  be  stated  in  this 
certificate  are  specifically  set  forth  in  the  statute  (Section  5134, 
Revised  Statutes),  viz.: 

First.  The  name  assumed  by  such  association,  which  name 
shall  be  subject  to  the  approval  of  the  Comptroller  of  die  Cur- 
rency. 

Second.  The  place  where  its  operations  of  discount  and  deposit 


202 

are  to  be  carried  ou,  designating  the  State,  Territory,  or  District 
and  the  particular  county  and  city,  town,  or  village. 

Third.  The  amount  of  capital  stock  and  the  number  of  shares 
into  which  the  same  is  to  be  divided. 

Fourth.  The  names  and  places  of  residence  of  the  shareholders 
and  the  number  of  shares  held  by  each  of  them. 

Fifth.  The  fact  that  the  certificate  is  made  to  enable  such  per- 
sons to  avail  themselves  of  the  advantages  of  this  title. 

Every  one  of  these  matters  must  be  stated  clearly  and  definitely 
in  the  certificate,  but  no  other  matter  should  be  included  in  it. 

The  following  is  the  form  for  the  organization  certificate,  fur- 
nished by  the  Comptroller  of  the  Currency  : 

Organization  Certificate. 

We,  the  undersigned,  whose  names  are  specified  in  article  fourth  of  this 
certificate,  having  associated  ourselves  for  the  purpose  of  organizing  an  asso- 
ciation for  carrying  on  the  business  of  banking  under  the  laws  of  the  United 
Slates,  do  make  and  execute  the  following  organization  certificate ; 

First.  The  name  of  the  association  shall  be  "  The .'' 

Second.  The  said   association    shall   be  located  in  the  of , 

county  of and  State  of  ,  where  its  operations  of  discount  and 

deposit  are  to  be  carried  on. 

Third.  The  capital  stock  of  this  association  shall  be >  dollars  {$ ), 

and  the  same  shall  be  divided  into shares  of  one  hundred  dollars 

each. 

Fourth.  The  name  and  residence  of  each  of  the  shareholders  of  this  asso- 
ciation, with  the  number  of  shares  held  by  each,  are  as  follows : 


Name. 


Residence. 


Number  of  shares. 


Fifth.  This  certificate  is  made  in  order  that  we  may  avail  ourselres  of  the 
advantages  of  the  aforesaid  laws  of  the  United  States. 

In  witness  whereof  we  have  hereunto  set  our  hands  this  day  of 

190- 

[Signatures  of  corporators.} 


State  of 


County  of  ■ 


[  ss . 


On  this  the day  of A.  D.  190-,  before  me,  a of 


personally  came ,  to  me  well  known,  who  severally  acknow- 
ledged that  they  executed  the  foregoing  certificate  for  the  purposes  therein 
mentioned. 

Witness  my  hand  and  seal  of  office  the  day  and  year  aforesaid. 


[Seal  of  notary  or  court.] 


203 

Must  be  Signed  and  Acknowledged.— The  persons  sign- 
ing the  articles  of  association  must  also  sign  the  organization 
certificate,  (Section  5134,  Revised  Statutes.)  And  in  addition, 
each  person  signing  such  certificate  is  required  to  acknowledge  his 
signature  thereto  before  a  notary  public  or  a  judge  of  some  court  of 
record.     (Section  5135,  Revised  Statutes.) 

Before  What  Officer  Acknowledgment  Can  Be  Made.— The 
acknowledgment  must  be  made  before  one  of  the  ojQBcers  specified, 
but  before  no  other.  The  acknowledgment  can  not  be  taken  by 
the  clerk  of  a  court,  but  must  be  taken  by  the  judge  himself. 

Officer  Must  Affix  Seal. — The  acknowledgment  must  be 
authenticated  by  the  seal  of  the  notary  or  court.  This  require- 
ment is  not  dispensed  with  by  any  State  law,  that  notaries  are  not 
required  to  have  seals,  and  no  certificate  from  a  State  officer  or 
other  evidence,  that  the  attesting  officer  is  a  notar>'  public  and 
qualified  to  take  acknowledgments,  will  answer  in  place  of  a  seal. 
The  seal  of  the  court  may,  of  course,  be  affixed  by  the  clerk  of  the 
court,  but  it  must  not  be  understood  because  the  clerk  may  affix 
the  seal,  that  the  acknowledgment  may  be  taken  by  him. 

By  Whom  Organization  Certificates  Executed. — The 
organization  certificate  and  the  articles  of  association  nmst  be 
signed  by  the  same  persons  and  only  by  subscribers  to  the  stock  of 
the  proposed  bank,  and  it  is  usually  best  not  to  have  these  papers 
signed  until  all  preliminary  matters  are  arranged  ;  as  it  sometimes 
happens  that  persons  who  were  to  be  corporators,  for  one  reason  or 
another,  decide  not  to  take  part  in  the  proposed  organization. 

It  is  not  necessary  that  all  the  subscribers  to  stock  should  join  in 
executing  these  papers.  The  Comptroller  holds  that  five  of  the  sub- 
scribers are  sufficient,  and  to  save  the  trouble  of  obtaining  many 
signatures,  often  a  few  subscribers  are  .selected  for  this  purpose  ;  but 
all  the  names  of  subscribers  to  the  stock  must  be  given  in  the 
organization  certificate,  though  not  necessarily  in  their  own  hand 
writing,  also  their  places  of  residence.  (R.  S.,  Sec.  5134.)  As  the 
papers  may  be  executed  by  a  few  persons,  so  the  full  amount  of 
stock  may  be  listed  in  the  names  of  a  few  and  later  be  distributed. 
(See  page  205.) 

The  names  of  those  who  sign  the  application  for  title  of  bank 
must  all  appear  in  the  organization  certificate  as  corporators  or  at 


204 

least  as  shareholders,  otherwise  waiver  of  right  to  participate  in  the 
organization  of  any  one  or  more  such  applicants,  not  participating, 
must  be  furnished  the  Comptroller. 

When  an  officer  joins  in  the  execution  of  the  organization  certifi- 
cate as  a  director  as  well  as  an  officer,  his  name  should  appear  in 
notary's  jurat  both  as  an  officer  and  as  a  director. 

Ho'w  Corporators  Should  Sign. — In  executing  the  organiza- 
tion papers,  each  person  should  sign  his  Christian  name  and  sur- 
name in  full,  as  is  usually  done  in  the  execution  of  deeds  and  other 
legal  instruments. 

Corporators  May  Act  by  Agent  or  Attorney. — There  seems 
to  be  no  reason  why  a  corporator  may  not  execute  the  papers  by 
an  agent  or  attorney.  In  the  case  of  the  organization  of  a  railroad 
corporation,  it  was  said  by  the  Court  of  Appeals  of  New  York, 
that  the  instrument  of  incorporation  might  be  executed  by  a  duly 
authorized  agent.  (Matter  of  N.  Y.,  h.  E.  and  W.  R.  R.  Co., 
99  N.  Y.,  12.)  And  there  is  nothing  in  the  National  banking  law 
to  require  a  different  rule  in  the  organization  of  a  National  bank. 
As  was  said  in  the  case  referred  to,  "  the  statute  does  not  forbid  it  ; 
the  ordinary  rules  of  law  justify,  rather  than  condemn  it."  The 
power  of  attorney  need  not,  of  course,  be  in  any  special  form,  but 
it  should  clearly  state  that  the  person  giving  it,  authorizes  the  per- 
son to  whom  it  is  given,  to  take  shares  for  him  in  the  proposed 
association,  and  to  execute  in  his  name  the  articles  of  association 
and  organization  certificate  and  any  other  necessary  papers-  As  it 
should  be  filed  and  recorded  in  the  office  of  the  Comptroller  of  the 
Currency  along  with  the  organization  certificate  it  should  be  ac- 
knowledged in  the  same  way  that  that  instrument  is  acknowledged. 
The  following  is  a  form  of  power  of  attorney  that  may  be  used : 

Know  all  men  by  these  presents  that  I ,  of ,  do  hereby 

appoint ,  of ,  my  attorney,  for  me  and  in  my  name  to 

subscribe  for shares  in  the  original  capital  stock  of  a  National  bank- 
ing association  to  be  located  in  the of ,  county  of' ,  State 

of ',  and  to  be  known  as  the ;  and  in  my  name  to  sign  and  exe- 
cute all  papers  and  instruments  that  it  shall  be  proper  and  necessary  for  the 

corporators  of  the  said to  sign  and  execute  in  forming  the  same  ;  hereby 

ratifying  and  confirming  all  that  my  said  attorney  shall  lawfully  do  by  virtue 
hereof. 

In    witness   whereof   I    have   hereunto    set   my  hand  this  day  of 

— ,  19—. 

[Signature.] 


205 

StaTR  of ,  County  of ss  : 

On  this  —  day  of — ,  19 — ,  before  me,  a  notary  public  in  and  for  the  State 
and  county  aforesaid,  appeared ,  known  to  me  to  be  the  person  who  exe- 
cuted the   foregoing  instrument,   and   acknowledged  that  he  executed  the 

same.  [Signature  of  notary.] 

[Seal  of  notary.] 

Entire  Stock  May  be  Taken  by  a  Few  Persons  and  After- 
wards Distributed. — When  a  considerable  number  of  persons 
sub.scribe  to  the  stock,  it  may  expedite  matters  for  a  few  to  take 
the  entire  stock  in  their  names,  and  after  they  have  executed  and 
filed  the  organization  papers,  distribute  the  stock  by  issuing  at 
once  temporary  certificates,  showing  interest  in  stock,  to  the  other 
subscribers,  before  any  pa3mients  on  stock  are  called  for,  and  not 
waiting  until  the  regular  certificates  are  prepared  nor  until  the 
bank  is  authorized  to  begin  business  ;  but  in  order  that  the  regular 
stock  book  may  show  the  original  holdings  of  the  stock,  in  the 
names  of  these  corporators,  to  agree  with  the  organization  certi- 
ficate, the  first  regular  certificates  should  be  issued  to  them  and 
then  assigned  to  the  other  subscribers,  to  replace  the  temporary 
certificates. 


Organization  Papers. — When  the  title  selected  has  been  ap- 
proved by  the  Comptroller,  he  forwards  to  the  applicants  blank 
organization  papers,  with  specific  instructions  for  their  execution. 
These  papers  are  as  follows:  Articles  of  Association,  Organiza- 
tion Certificate,  Oaths  of  Directors,  Certificate  of  Ofiicers  and 
Directors  as  to  payment  on  Capital  Stock,  and  Order  for  Circula- 
tion ;  in  the  case  of  conversion  of  a  State  bank,  there  is  an  addi- 
tional form  for  shareholders  to  authorize  conversion.  The  execu- 
tion of  these  papers  is  a  very  simple  matter,  bvit  mistakes  are  very 
frequently  made  from  carelessness.  For  example  :  the  Corporate 
Title  is  not  inserted  exactly  as  approved  by  the  Comptroller, 
perhaps  abbreviated  or  name  of  State  added  ;  names  of  persons 
are  misspelled  ;  errors  made  in  jurat,  etc.  Care  should  be  taken 
in  preparing  the  papers  to  avoid  the  delay  incident  to  their  return 
by  the  Comptroller  for  correction. 


Association  Becomes  Body  Corporate. — When  the  articles 
of  association  and  organization  certificate  have  been  executed  and 
filed  with  the  Comptroller,  the  association  becomes  a  body  corporate 
from  the  date  on  which  the  organization  certificate  was  executed. 
(Section  5136,  R.  S.)  It  can  then  enter  into  contracts  as  a  corpora- 
tion ;  call  for  payment  upon  capital  stock  ;  lease  or  purchase 
banking-house  and  other  necessary  property,  in  short,  transact  in 
its  corporate  name  and  capacity  any  matters  preliminary  to  the 
banking  business.     (Section  5136,  R.  S.) 


2o6 

When  Organization  Papers  Should  be  Filed. — It  is  best 
to  file  the  articles  and  orgauization  certificate  with  the  Comptroller 
as  soon  as  executed,  for  until  filed  the  association  cannot  act  as  a 
body  corporate.  (Sec.  5136,  R.  S.)  The  other  papers  should 
also  be  filed  as  soon  as  possible,  so  that  if  there  are  any  errors  they 
may  be  corrected  ;  then  when  the  fifty  per  cent  of  capital  has  been 
paid  in  and  certified  to  the  Comptroller  and  bonds  deposited  there 
will  be  no  delay  in  chartering  the  bank. 

Qualification  of  Directors. — Section  5146,  R.  S.,  provides 
that  a  director  of  a  National  bank  must  be  a  citizen  of  the  U.  S., 
and  at  least  three-fourths  of  the  board  must  have  resided  in  the  State 
or  Territory  where  the  bank  is  located  for  the  year  just  preceding 
their  election,  and  must  be  resident  therein  while  directors  ;  every 
director  also  must  own  in  his  own  right  and  free  from  pledge,  at 
least  ten  shares  of  the  capital  stock  of  the  bank. 

Election  of  Directors.— Section  5145,  R.  S.,  provides  that  a 
National  bank  shall  have  at  least  five  directors,  who  shall  be  elected 
at  a  shareholders'  meeting,  to  be  held  before  the  bank  is  chartered, 
and  afterward  at  annual  meetings  in  January.  The  usual  date  is 
the  second  Tuesday  of  January,  but  this  is  not  obligatory.  Notwith- 
standing the  provision  for  such  election,  the  Comptroller's  Office  has 
always  construed  Sec.  5147,  R.  S.,  as  authorizing  the  first  board  of 
directors  to  be  appointed  or  elected.  In  either  case  it  is  necessary 
that  the  directors  be  appointed  or  elected  at  the  same  time  or  im- 
mediately after  the  execution  of  the  organization  papers  that  they 
may  elect  the  officers  of  the  bank,  to  meet  the  Comptroller's  re- 
quirement that  the  president  or  cashier  certify  to  the  execution  of 
the  articles  of  association. 

Number  of  Directors. — In  fixing  the  number  of  directors,  it  is 
well  to  make  a  sliding  scale  in  articles  of  association,  to  avoid  the 
necessity  of  calling  a  meeting  of  stockholders  to  change  the  articles, 
in  case  it  is  deemed  expedient  at  the  annual  meeting  to  increase  or 
decrease  the  number.  The  form  is  given  on  a  preceding  page  We 
would  suggest  having  a  board  of  at  least  seven  members — as  the 
Comptroller  requires  that  the  reports  of  condition,  made  five  times 
during  the  year,  be  attested  b}'  not  less  than  three  directors ;  so  that 
with  a  smaller  board  it  will  be  seen  that  the  liberty  of  the  members 
to  be  absent  from  the  place  is  curtailed. 

Oath  of  Directors. — The  oaths  ofdirectors  required  by  Sec.  5147, 
R.  S. ,  may  be  taken  singly  or  jointly  as  is  most  convenient ;  generally 
they  are  taken  at  the  meeting  to  organize  the  board.  They  must  not 
antedate  the  execution  of  the  articles  and  organization  certificate. 
The  Comptroller  requires  that  the  oath  be  administered  by  an  officer 


307 

having  an   official   seal   to   attest  the  same  ;   and  that  the  sworn 
statement  be  sent  at  once  to  the  Comptroller. 

Blank  forms  for  directors'   oaths  are  furnished  by  the  Comp- 
troller of  the  Currency  and  written   forms  of  any  kind  should  not 

be  used. 

Form  for  Joint  Oath  of  Directors. 

State  of , 


County  of 


}.„.. 


We,  the  undersigned,  directors  of  the ,  of ,  in  the  State  of 

,  being  citizens  of   the   United  States  and  residents  of  the  State  of 

-,  do,  each  for  himself  and  not  one  for  the  other,  solemnly  swear  that 


we  will  severally,  so  far  as  the  duty  devolves  on  us,  diligently  and  honestly 
administer  the  affairs  of  said  association ;  and  that  we  will  not  knowingly 
violate,  or  willingly  permit  to  be  violated,  any  of  the  provisions  of  the  statutes 
of  the  United  States  under  which  said  association  has  been  organized ;  and 
each  for  himself  does  solemnly  swear  that  he  is  the  owner  in  good  faith  and 
in  his  own  right  of  the  number  of  shares  of  stock  required  by  said  statutes, 
subsciibed  by  him  or  standing  in  his  name  on  the  books  of  the  said  associa- 
tion ;  and  that  the  same  is  not  hypothecated,  or  in  any  way  pledged  as 
security  for  any  loan  or  debt. 


Signature. 


Residence. 


Subscribed  and  sworn  to  this day  of ,  190 — ,  before  the  under- 
signed, a in  and  for  said  county. 

[SEAi<.]  ,  Notary  Public. 

Note. — Each  director  when  elected  must  take  the  oath  of  office  and,  under 
Section  5147,  U.  S.  R.  S.,  it  should  be  transmitted  to  the  Comptroller  of  the 
Currency  immediately  after  the  election.  If  the  officer  administering  the 
oath  has  no  seal,  a  certificate  of  the  proper  State,  county,  or  court  official  to 
the  effect  that  such  officer  is  authorized  to  take  acknowledgments  must  be 
attached. 

The  form  for  single  oath  of  director  is  the  same  as  the  joint  oath, 
excepting  that  it  is  prepared  as  an  individual  oath. 

Certificate  of  Bank  Succeeding  a  State  Bank. — When  a 
National  bank  is  being  organized  dc  ?iovo,  to  succeed  a  State  bank- 
ing corporation  or  private  bank,  the  Comptroller  before  granting 
authority  to  begin  business  requires  a  certificate  as  follows  : 

We,  the   undersigned    directors  of  the National   bank   of ,    do 

hereby  certify  and  agree  that  any  assets  purchased  by  this   bank,  from  ^he 


2o8 

Bauk  of ,  will  not  include  real  estate  (other  than  the  banking 

premises),  stocks  of  other  corporations,  loans  secured  by  real  estate,  or  loans 

in  excess  of  ten  per  cent,  of  the  paid-in  capital  stock  of  the National 

Bank  of . 

Witness  our  hands  this day  of ,  19 — . 

[signatures  of  directors.] 

Payment  on  Stock  Required. — Section  5168,  R.  S.,  requires 
that  at  least  50  per  cent,  of  the  capital  stock  be  paid  in  and  certified 
to  the  Comptroller  before  a  National  bank  can  be  chartered. 
Delay  may  be  avoided  by  a  few  of  the  subscribers  to  the  stock 
making  payments  suflScient  to  cover  this  requirement  without 
waiting  to  receive  the  pro  rata  proportion  from  all  the  subscribers. 

Calling  for  Payment  on  Stock.  — The  directors  may  call  for 
the  payment  of  50  per  cent,  of  the  capital  stock  at  any  time  they 
see  fit,  unless  the  stock  has  been  taken  on  some  agreement  to  the 
contrary,  as,  that  the  payment  shall  not  be  called  for  before  a 
certain  date  or  before  the  happening  of  a  certain  event.  The 
authority  of  the  directors  to  call  for  further  payments  on  subscrip- 
tions to  stock  would  appear  to  be  limited  by  Section  5140,  Revised 
Statutes,  which  provides  that  after  the  first  payment  of  50  per 
cent,  of  the  capital,  the  balance  shall  be  paid  in  monthly  install- 
ments of  at  least  10  per  cent.  It  might  be  held  that  this 
section  simply  prescribes  the  time  within  which  the  capital  must 
be  paid  in.  The  point  has  never  been  judicially  determined. 
A  fair  construction  of  the  section  referred  to  would  seem  to  give  a 
subscriber  to  stock  the  right  to  make  payment  in  such  monthly 
installments,  unless  a  special  agreement  has  been  entered  into  by 
the  subscribers,  authorizing  the  board  to  call  for  payments  of  stock 
at  pleasure,  or  in  larger  installments  than  is  required  by  law. 
The  second  and  subsequent  payments  of  course  need  not  be  re- 
stricted to  10  per  cent,  each,  as  the  capital  stock  may  be  paid  if 
desired  in  advance  of  the  time  required  by  law.  Certificates  of 
payments  of  installments  should  not  include  a  fraction  of  a  dollar. 

Book  Entry  of  Payments  on  Subscriptions. — Payments  on 
subscriptions  to  capital  stock  should  not  be  carried  to  stock  ac- 
count, nor  entered  in  reports  of  condition  to  the  Comptroller  as 
capital  stock  until  these  payments  are  certified  to  the  Comptroller. 
Prior  thereto  they  should  be  credited  to  shareholders  in  a  separate 
account  and  entered  in  the  reports  to  the  Comptroller  under  head- 
ing ' '  Liabilities  other  than  those  stated. ' ' 

Certificate  of  Payment  on  Stock. — When  fifty  per  cent,  of 
the  capital  stock  has  been  paid  in  it  is  required  by  Section  5168, 
Revised  Statutes,  that  this  be  certified  to  the  Comptroller  by  the 
president  or  cashier  of  the  bank.  (vSection  5168,  Revised  Statutes.) 
The  form  of  such  certificate  is  as  follows : 


209 
CKRTiriCATE   OF   PAYMENT   OF    FiRST    INSTALLMENT   OF  CAPITAL   STOCK. 

It  is  hereby  certified,  as  required  by  Section  5140  of  the  Revised  vStatutes  of 

the  United  States,  that  of  the  authorized  capital  stock  of  $  ,  of  The  

National Bank  of ,  ,  organized  in  conformity  with  the  provisions 

of  the  banking   laws  of  the  United   States  authorizing   the   organization  of 
national  banking  associations,  the  first  installment,  amounting  to  $ ,  has 

been  paid  in  cash. 

,  President. 

or 

,  Cashier. 

State  of ,        \  ^^  . 

Cou7ity  of ,  / 

Subscribed  and  sworn  to  before  the  undersigned,  a of  the  said  county, 

this day  of ,  190- 


[SEAL.]  (Official  title) 

Circulating  Notes. — It  is  optional  with  a  National  bank 
whether  it  issues  circulating  notes  or  not,  but  as  the  law  requires 
a  certain  bond  deposit  to  be  maintained  with  the  U.  S.  Treasurer, 
regardless  of  note  issue,  the  banks,  with  few  exceptions,  take  out 
circulation. 

Signing  Circulating  Notes. — Section  5172,  Revised  Statutes, 
requires  that  circulating  notes  of  National  banks  shall  be  attested 
by  the  signatures  of  the  president  or  vice-president  and  the  cashier, 
but  the  Act  of  July  12,  1892,  provides  that  all  such  notes  "issued 
to  or  received  by  any  National  bank,  though  they  may  have  been 
lost  or  stolen  from  the  bank  and  put  in  circulation  without  the 
signatures  above  referred  to, "  shall  be  redeemed  by  the  bank.  Such 
being  the  case,  and  no  penalty  being  attached  for  failure  to  affix 
signatures,  many  of  the  banks  have  them  lithographed,  printed,  or 
even  stamped  with  rubber  stamp. 

Order  for  Circulation. — A  National  bank.ng  association  is 
entitled  to  circulating  notes  to  the  amount  of  the  face  value  of  the 
U.  S.  bonds  deposited  to  secure  the  same  [unless  the  market  value 
of  the  bonds  is  below  par],  and  is  entitled  to  a  total  amount  equal 
to  its  capital  stock  paid  in,  but  not  over  one-third  in  five-dollar 
notes.  An  order  for  these  notes  should  be  sent  to  the  Comptroller 
of  the  Currency,  with  the  organization  papers.  The  Comptroller 
furnishes  a  blank  for  the  order  as  follows : 


2IO 

Original  Ordbr. 

Ser.  :     You  will  please  have  plates  prepared,  and  $ in  circulating  notes 

printed  therefrom,  for  this  bank  as  follows  : 

Plate  5,  5,  5,  5     Sheets  ($20  per  sheetK    .      $ 

"     10,10,10,20 "      (I50  per  sheet)  .    .    .$ 

"     50,  100    .    .    .       "       ($150  per  sheet)    .    .  $ 

Total $ 

,  Cashier. 


Amount  and  Kind  of  Notes, — The  Comptroller  requires 
that  the  original  order  for  circulation  be  made  for  about  one-fourth 
more  than  the  amount  the  bank  will  be  entitled  to  on  its  bond  de- 
posit, that  he  may  have  a  suflScieut  balance  on  hand  to  reimburse 
the  bank  for  its  mutilated  notes  when  redeemed  and  destroyed. 

If  a  bank  desires  five-dollar  notes  it  is  necessary  to  order  two 
plates,  as  only  one-third  of  the  circulation  can  be  in  that  denomina- 
tion (see  Act  March  14,  1900),  as  the  fives  are  not  printed  front 
a  plate  in  combination  with  another  denomination,  as  in  the  case  of 
tens,  twenties,  fifties,  and  one  hundreds. 

Time  for  Printing  Notes. — The  Comptroller  will  not  make  the 
order  on  the  Bureau  of  Engraving  and  Printing  for  printing  circu- 
lation until  the  bank  has  fully  complied  with  the  requirements  for 
charter  and  the  Bank  given  a  charter  number.  Then  about  forty 
days  are  required  to  engrave  the  plate  and  print  the  notes. 

The  Deposit  of  Bonds. — The  organization  papers  and  certifi- 
cate of  payment  of  capital  stock  having  been  filed  with  the  Comp- 
troller, it  only  remains  to  make  the  required  deposit  of  United  States 
bonds.  These  bonds  must  be  assigned  to  "the  Treasurer  of  the 
United  States  in  trust "  for  the  bank  to  be  chartered.  This  deposit 
is  required  by  law  whether  a  bank  takes  out  circulation  or  not. 
The  bonds  must  be  registered,  but  coupon  bonds  will  be  accepted, 
the  Secretary  of  the  Treasury  being  authorized  to  receive  and  issue 
registered  bonds  for  them,  bearing  same  interest,  etc.  The  mini- 
mum amount  of  bonds  required  to  be  deposited  is  : 

1.  For  bank  of  $150,000  capital  or  less,  an  amount  equal  to  one- 
fourth  of  the  capital  stock. 

2.  For  a  bank  with  capital  over  $150,000,  a  minimum  of  $50,000. 

The  Comptroller's  Certificate. — When  the  bank  has  complied 
with  all  these  conditions,  the  Comptroller  issues  a  certificate  that  it 
is  authorized  to  begin  business  under  the  National  Bank  Act.  This 
certificate  the  association  is  entitled  to  as  a  matter  of  right ;  and 
the  Comptroller  can  only  withhold  if  he  has  reason  to  believe  that  . 
the  bank  has  been  organized  for  objects  other  than  those  contem- 
plated by  the  National  banking  laws. 

When  the  Comptroller  signs  certificate  he  wires  the  bank  its 
charter  number  and  that  it  is  authorized  to  begin  business. 


21  I 

Certificate  Must  be  Published. — The  bank  must  publish 
the  Comptroller's  ccrtiScate  for  al  least  sixty  days  in  a  newspaper 
published  in  the  city  or  county  where  the  bank  is  located.  (Section 
5170,  R.  S.)  An  insertion  in  a  weekly  newspaper  or  a  weekly 
edition  of  a  daily  is  sufficient  and  the  oath  of  the  publisher  that 
the  certificate  has  been  published  for  the  time  required,  with 
printed  copy  of  certificate  attached,  cut  from  the  newspaper,  must 
be  filed  in  the  Comptroller's  office. 

Cost  of  the  Engraved  Plates. — The  law  requires  that  banks 
bear  the  expense  of  preparing  the  plates  required.  No  charge  is 
made  for  paper,  or  for  printing  of  circulation.  The  cost  is  as  fol- 
lows: Plate  5,  5,  5,  5,  $75  :  Plate  10,  10,  10,  20,  $75;  Plate  50, 
roo,  $50. 


CONVERSION  OF  STATE  BANKS  TO  NATIONAL. 

Conversion  Without  Reorganization. — Section  5154,  Revised 
Statutes,  provides  that  a  State  bank  may  be  changed  to  a  National 
bank  without  reorganization.  This  plan  is  sometimes  found  ad- 
vantageous, although  as  a  rule  it  is  better  to  close  up  the  affairs 
of  the  old  bank  and  organize  under  the  National  system  de  novo. 

If  a  State  bank  propo.ses  to  enter  the  National  .system  by  con- 
version,  the  Comptroller   insists  upon  an  examination  of  assets 
before  granting  a  charter,  but  in  organizing  de  novo,  this  delay  is 
avoided,  as  the  Comptroller  accepts  a  certificate  that  only  assets 
which  a  National  bank  can  lawfully  hold  will  be  purchased  from  the  ■ 
old   bank   and  the  examination  is  made  soon  after  the  charter  is 
granted. 

Only  Incorporated  Banks  Can  be  Converted. — A  bank  pro- 
posing to  convert  to  a  National  bank  must  be  an  incorporated 
State  institution,  either  by  special  charter  or  under  some  general 
statute.  A  private  bank  to  enter  the  National  system  must  reor- 
ganize as  an  entirely  new  association,  though,  of  course,  the  new 
organization  will  succeed  to  the  good-will  of  the  old  bank  and 
take  such  of  its  assets  as  a  National  bank  is  permitted  to  hold. 

Assets  of  Bank.— The  National  Bank  Act  prohibits  National 
banks  holding  real  estate  other  than  the  banking-house  property, 
loans  on  real  estate  or  mortgage,  or  loans  in  excess  of  one-tenth 
of  its  capital  (Sections  5137  and  5200.  Revised  Statutes),  and  the 
Comptroller  requires  that  State  or  private  banking  institutions 
proposing  to  enter  the  National  system  shall  liquidate  such  assets 
before  they  are  chartered  as  National  banks,  although  if  the  bulk 
of  a  State  bank's  assets  are  found  to  be  such  as  a  National  bank 


212 

can  hold,  the  Comptroller  may  charter  the  bank  under  guarantee 
that  the  balance  will  be  liquidated  as  rapidly  as  possible. 

Consent  of  Shareholders. — The  first  step  in  the  process  of 
conversion  is  to  get  the  assent  of  shareholders  owning  two-thirds 
of  the  capital  stock.  (Section  5154,  Revised  Statutes.)  Frequently 
this  is  done,  by  merely  obtaining  the  signature,  to  a  form  of  authorit}' 
furnished  by  the  Comptroller  of  the  Currencj'-,  without  calling  a 
meeting  of  shareholders  for  the  purpose  of  considering  the  matter. 
But  unless  the  signatures  of  all  the  shareholders  can  be  so  obtained, 
the  action  should  be  taken  at  a  duly  convened  meeting,  thirty  days' 
notice  in  writing  being  given,  for,  as  will  be  seen  in  a  subsequent 
place,  where  authority  is  given,  to  any  number  of  shareholders  less 
than  the  whole  number,  to  determine  any  matter  relating  to  the 
corporate  business,  it  is  not  meant  that  these  can  act  wholly  in- 
dependently of  the  other  shareholders,  without  giving  them  any 
voice  in  the  matter,  but  every  shareholder  must  be  afforded  an 
opportunity  to  express  his  assent  or  dissent ;  and,  therefore,  non- 
assenting  shareholders  are  not  bound  by  any  action  of  the  other 
shareholders  had  at  a  meeting  of  which  each  was  not  duly  notified. 
The  assent  of  the  holders  of  two-thirds  of  the  bank  stock  having 
been  obtained,  notice  should  be  given  the  Comptroller  of  the  Cur- 
rency of  intention  to  convert,  naming  title  wanted  for  bank  and 
requesting  that  proper  blanks  be  sent. 

The  following  is  the  form  furnished  by  the  Comptroller  of  the 
Currency  for  the  assent  of  the  shareholders.  It  is  known  as  the 
"  authority  for  conversion." 

We,  the  undersigned,  stockholders  of  the ,  located  in  the of 

-,  county  of ,  State  of ,  having  a  capital  of dollars, 


do  hereby  authorize  and  empower  the  directors  thereof  to  change  and  con- 
vert said  bank  into  a  National  banking  association  under  the  sections  of  the 
Revised  Statutes  which  authorize  the  conversion  of  State  banks  into  National 
associations,  and  of  subsequent  acts  in  addition  to  or  amendatory  thereof; 
and  we  do  also  authorize  the  said  directors,  or  a  majority  thereof,  to  make 
and  execute  the  articles  of  association  and  organization  certificate  required 
to  be  made  or  contemplated  by  said  statutes,  and  also  to  make  and  execute 
all  other  papers  and  certificates,  and  to  do  all  acts  necessary  to  be  done  to 
convert  said into  a  National  banking  association,  and  to  do  and  per- 
form all  such  acts  as  may  be  necessary  to  transfer  the  assets  of  every  descrip- 
tion and  character  of  said to  the  National  banking  association  into 

which  it  is  to  be  converted,  so  that  the  said  conversion  may  be  absolute  and 


213 

complete;  and  we  do  hereby  assume,  and  authorize  the  said  directors  to 
assume,  as  the  name  of  the  National  banking  association  into  which  tlie  said 

is  to  be  converted,  "  Tlie ;  "  and  we  do  hereby  appoint 

,  who  are  now  the  directors  of  the  said ,  to  be  the  directors  of 


the  said ,  to  hold  their  offices  as  such  directors  until  the  regular  annurd 

election  of  directors  is   held,  pursuant  to  the  provisions   of  said   Revised 
Statutes,  and  until  their  successors  are  chosen  and  qualified;  and  we  d) 

hereby  authorize  the  said  directors  of  the  said to  continue  in  office  the 

officers  of  the  said ,  or  to  appoint  or  elect  others,  as  to  them  may  seem 

best. 

In  witness  whereof  we  have  hereunto  set  our  hands  and  written  against 

our  names  the  number  of  shares  owned  by  us,  respectively,  this day  of 

,  A.D.  i8— . 


Names  of  stockholders.  Number  of  shares  owned  by  each. 


Should  Be  Presented  for  Signature  at  Shareholders'  Meet- 
ing.—For  the  reasons  above  mentioned  the  instrument  should  be 
presented  to  the  shareholders  for  signature  at  a  special  meeting  of 
shareholders  called  for  the  purpose  of  considering  the  question  of 
conversion.  If  any  regulation  or  by-law  of  the  bank  requires  that 
the  action  of  the  stockholders  at  a  corporate  meeting  shall  be  by 
ballot  (as  is  frequently  the  case),  the  "  authority  for  conversion  " 
should  be  put  into  the  form  of  a  resolution  and  adopted  by  a  vote 
of  the  shareholders,  and  the  Comptroller  should  be  advised  of  the 
reason  therefor. 

By  V^hom  Papers  Executed.  —In  the  case  of  a  conversion, 
the  articles  of  association  and  organization  certificate  are  executed 
by  the  directors,  and  not  by  the  shareholders.  (Section  5154,  Re- 
vised Statutes.)  And  it  is  not  necessary  that  all  of  the  directors 
should  join  in  the  execution  of  those  instruments ;  the  statute  is 
complied  with  if  a  majority  do  so.     {Id.) 

Articles  of  Association. — The  wording  of  the  first  part  of  the 
articles  of  association  should  be  as  follows : 

Articles  of  Association. 

We,  the  undersigned,  directors  of  the ,  having  been  authorized  by 

the  owner:?  of  two  thirds  of  the  capital  stock  of  said  bank,  to  change  and 
convert  the  said  bank  into  a  National  banking  association,  under  section 
5154  of  the  Revised  Statutes  of  the  United  States,  and  of  subsequent  acts  in 


214 

addition  to  or  amendatory  thereof,  and  to  execute  articles  of  association,  do 
hereby,  in  our  own  behalf  and  in  behalf  of  the  stockholders  whom  we 
represent,  make  and  execute  the  following  articles  of  association. 

First,  the  name  and  title  of  the  association  into  which  the  said is  to 

be  changed  and  converted  shall  be  "  The ." 

From  this  point  the  articles  will  follow  the  fortn  on  page  198. 

The  following  is  the  form  for  organization  certificate  furnished 
by  the  Comptroller  of  the  Currency  in  cases  of  conversion  : 

Organization  Certificate. 

We,  the  undersigned,  directors  of  the ,  having  been  duly  authorized 

by  the  owners  of  two-thirds  of  the  capital  stock  of  said  bank,  to  change  said 
bank  into  a  National  banking  association,  and  to  make  the  necessary  organ- 
ization certificate,  under  the  sections  of  the  Revised  Statutes  which  authorize 
the  conversion  of  State  banks  into  National  banking  associations,  and  of 
subsequent  acts  in  addition  to  or  amendatory  thereof,  do  sign  and  execute  the 
following  organization  certificate,  which  we  hereby  declare  we  are  authorized 
to  make  by  the  owners  of  two  thirds  of  the  capital  stock  of  said : 

First.  The  name  and  title  of  this  association  shall  be  "The ." 

Second.  The  said  association  shall  be  located  and  continued  in  the 

of ,  county  of and  State  of ,  where  its  operations  of  dis- 
count and  deposit  are  to  be  carried  on. 

Third.  The  capital  stock  of  this  association  shall  be dollars  {$ ), 

and  the  same  shall  be  divided  into shares  of dollars  each,  as  it 

is  now  divided  in  the  said  "  The ." 

Fourth.  The  name  and  residence  of  each  of  the  stockholders  of  the  said 
which   is  to  become  a  National  bank  under  the  provisions  of  the 


Revised  Statutes  aforesaid,  and  the  number  of  shares  of dollars  each 

held  by  each  stockholder  are  as  follows  ; 


Name. 


Residence. 


Number  of  shares. 


Fifth.  This  certificate  is  made  in  order  that  the  said and  the  stock- 
holders thereof  may  avail  themselves  of  the  advantages  of  the  aforesaid 

Revised  Statutes,  and  that  the  said may  be  changed  and  converted 

into  a  National  banking  association  under  the  name  and  title  of  the . 

In  witness  whereof  we  have  hereunto  set  our  hands  this day  of . 

eighteen  hundred  and . 

State  of 

ss. 


County  of  - 


..1 


On  this  the day  of ,  A.D.  19^ — ,  personally  came  before  me,  a 

— —  of  said  county, ,  directors  of  the ,  to  me  well 


215 

known,  who  severally  acknowledged  that  they  executed  the  foregoing  cortlfc 
cate  for  the  purposes  therein  mentioned. 

Witness  my  hand  and  seal  of  office  the  day  and  year  aforesaid. 

Certificate  of  Capital  Paid  In.— This  is  a  certificate  of  the 
president  or  cashier  of  the  l.-ank  to  the  Comptroller  of  the  Currency, 
showing  that  the  amount  of  paid-in  and  unimpaired  capital  of  the 
bank  converting  meets  the  legal  requirement  (form  similar  to  that 
on  page  209). 

Directors  Continue  To  Be  Such. — The  former  board  of  direc 
tors,  if  not  less  than  five,  may  be  continued  until  the  regular  annual 
election  (Sec.  5154,  R.  S.),  but  must  take  the  directors'  oath.     Ten 
shares  of  the  old  bank  stock,  regardless  of  its  par  value,  is  sufl5cient 
for  a  director  to  hold  to  be  eligible. 

Closing  Affairs  of  Old  Bank. — State    banks   converting    to 

National  Ijanks  must  be  guided  by  State  statutes  as  to  closing  up 
the  affairs  of  the  bank.  Conversion  to  a  National  bank  does  not 
destroy  or  change  the  identity  or  corporate  existence  of  the  State 
bank,  although  its  charter  as  a  State  bank  then  expires.  The 
bank  continues  as  a  corporate  body  simply  under  changed  juris- 
diction ;  its  rights  to  sue  and  be  sued  on  obligations  of  the  old 
bank  are  not  affected. 

Certificates  of  Stock. — A  State  bank  converting  to  a  National 
bank  does  not  require  to  issue  new  certificates  of  stock,  although 
it  is  preferable  to  do  so.  If  the  old  certificates  are  retained  they 
should  be  stamped  to  shovj^  the  changed  jurisdiction. 

Capital  of  Bank. — A  State  bank  converting  to  a  National  bank 
must  have  a  paid-in  capital  of  not  less  than  the  amount  prescribed  by 
the  National  Bank  Act  (see  page  196).       When  it  is  necessary  to 
increase  capital  of  bank  to  convert,  it  depends  upon  the  require- 
ments of  the  laws  of  the  State  in  which  the  bank  is  located 
whether  it  is  better  to  increase  under  State  laws,  and  then  convert, 
or  to  put  the  State  bank  into  liquidation  and  organize  de  novo  as 
a  National  bank.      Sometimes  considerable  delay  is  avoided  by 
taking  this  latter  course.     When  a  bank  increases  its  capital  before 
conversion,  the  Comptroller  requires  as  evidence  of  such  increase,  a 
certificate  of  the  State  oflBcer  with  whom  the  certificate  of  increa.se 
is  filed. 


3l6 


BY-LAWS. 

Tlie  power  to  adopt  by-laws  for  the  bank  is  generally  conferred 
on  the  directors  in  the  articles  of  association  ;  but  where  the  power 
is  not  delegated  to  the  directors  it  belongs  to  the  stockholders.  It 
is  a  requisite  of  every  valid  by-law  that  it  shall  be  consistent  with 
the  National  banking  laws  and  with  the  articles  of  association ;  a 
by-law  which  is  inconsistent  with  either  the  law  or  the  articles  is 
void.  Directors  often  fall  into  the  error  of  supposing  that  because 
they  have  power  to  amend  the  by-laws  they  may  change  them  in 
any  respect,  but  the  by-laws  often  contain  provisions  which  are 
found  in  the  articles  of  association,  and  these  provisions  can  not 
be  changed,  for,  in  effect,  this  would  be  to  amend  the  articles, 
which  can  be  done  only  by  the  shareholders.  Thus,  a  by-law  pre- 
scribing the  number  of  directors  the  bank  shall  have,  and  how 
many  shall  constitute  a  quorum,  can  not  be  amended  by  the  direc- 
tors if  such  amendment  conflict  with  any  provision  of  the  articles 
of  association. 

The  form  of  by-laws  given  in  the  following  pages  it  is  believed 
will  meet  the  usual  requirements  of  banks  and  be  sufl5cient  in  the 
great  majority  of  cases. 

GENERAL  FORM  FOR  BY-LAWS. 

By-laws  of  the  \_here  t?isert  the  title  of  the  bank']  organized  under  the  laws 
of  the  United  States,  and  authorized  by  the  Comptroller  of  the  Currency  to 
carry  on  the  business  of  banking. 

I. — The  regular  annual  meetings  of  stockholders  of  this  bank  for  the  elec- 
tion of  directors  and  for  the  transaction  of  other  legitimate  business,  shall  be 
held  between  the  hours  of  ten  o'clock  A.  M.  and  four  o'clock  p.  M.  on  the  day 
specified  in  the  articles  of  association,  and  the  thirty  days'  notice  of  the  time 
and  object  of  such  meetings  thereby  required  shall  be  given  by  the  president, 
vice-president,  or  cashier  by  publication  in  [insert  location  of  paper  in 
which  publication  is  to  be  made.']  The  board  of  directors  shall,  within  one 
month  previous  to  the  date  fixed  for  such  meetings,  appoint  three  stock- 
holders to  be  judges  of  the  election  for  directors,  who  shall  hold  and  conduct 
the  same,  and  who  shall,  under  their  hands,  notify  the  person  acting  as 
cashier  of  this  bank  of  the  result  thereof  as  soon  as  ascertained,  and  of  the 
names  of  the  directors-elect. 

2. — The  person  acting  as  cashier  shall  thereupon  cause  the  returns  made 
by  the  judges  of  election  to  be  recorded  upon  the  minute-book  of  the  bank, 
and  shall  notify  the  directors  chosen  of  their  election,  and  of  the  time  for 


21/ 

them  to  meet  at  the  banking-house  for  the  organization  of  the  new  board.  If 
at  the  time  fixed  for  such  meetings  there  should  be  no  quorum  m  attendance, 
tiie  directors-elect  present,  may  adjourn  from  time  to  time,  until  a  quorum 
shall  be  obtained. 

3. — The  directors-elect  shall  meet  for  organization,  upon  the  notification 
given  in  accordance  with  law  2,  within  one  week  from  the  time  of  their  elec- 
tion, but  shall  not  do  any  business  whatever  prior  to  qualifying  by  taking  the 
oath  of  office  as  required  by  law. 

4. — If  the  annual  election  for  directors  should  not  be  held  on  the  day  fixed 
by  the  articles  of  association,  the  directors  in  office  shall  order  a  special  elec- 
tion, of  which  notice  shall  be  given,  judges  appointed,  and  returns  made  and 
recorded  upon  the  minute-book ;  and  the  directors  chosen  thereat  shall  be 
certified  to  the  cashier,  and  notified  as  provided  by  laws  1  and  2. 

5. — The  officers  of  this  bank  shall  be  a  president,  vice-president,  cashier, 
teller,  and  book-keeper,  and  such  other  officers  as  may  be  required  from 
time  to  time  for  the  prompt  and  orderly  transaction  of  its  business  ;  and  all 
officers,  clerks,  and  agents  shall  be  elected,  appointed,  or  employed  by  the 
board  of  directors,  or  with  the  consent  thereof,  and  their  several  duties  may 
be  prescribed  by  the  board. 

6. — The  president  shall  hold  his  office  for  the  current  year  for  which  the 
board  of  which  he  shall  be  n  member  was  elected,  unless  he  shall  resign, 
become  disqualified,  or  be  removed  ;  and  any  vacancy  occurring  in  the  office 
of  president  or  in  the  board  of  directors  shall  be  filled  by  the  remaining 
members. 

7. — The  cashier  and  the  subordinate  officers  and  clerks  shall  be  appointed 

to  hold  their  offices  respectively  during  the  pleasure  of  the  board  of  directors. 

8, — The  cashier  of  this  bank  shall  be  responsible  for  all  the  moneys,  funds, 

and  valuables  of  the  bank,  and  shall  give  bond,  with  security  to  be  approved 

by  the  board,  in  the  penal  sum  of dollars,  conditioned  for  the  faithful 

and  honest  discharge  of  his  duties  as  such  cashier,  and  that  he  will  faithfully 
apply  and  account  for  all  such  moneys,  funds,  and  valuables,  and  deliver  the 
same  to  the  order  of  the  board  of  directors  of  this  bank,  or  to  the  person  or 
persons  authorized  to  receive  them.  [The  bond  usually  required  is  from 
$5,000  upward,  according  to  capital  of  bank  ] 

9. — The  president  of  this  bank  shall  be  responsible  for  all  such  sums  of 
money  and  property  of  every  kind  as  may  be  intrusted  to  his  care  or  placed 
in  his  hands  by  the  board  of  directors  or  by  the  cashier,  or  otherwise  come 
into  his  hands  as  president,  and  shall  give  bond,  with  security  to  be  approved 

by  the  board,  in  the  penal  sum  of dollars,  conditioned  for  the  faithful 

discharge  of  his  duties  as  such  president,  and  that  he  will  faithfully  and  hon- 
estly apply  and  account  for  all  sums  of  money  and  other  property  of  this 
bank  that  may  come  into  his  hands  as  such  president,  and  pay  over  and 
dehver  the  same  to  the  order  of  the  board  of  directors,  or  to  any  other  person 
or  persons  authorized  by  the  board  to  receive  the  same. 


2l8 

lo. — The  teller  shall  be  responible  for  all  such  sums  of  money,  property, 
and  funds  of  every  description  as  may  from  time  to  time  be  placed  in  his 
hands  by  the  cashier,  or  otherwise  come  into  his  possession  as  teller,  and 
shall  give  bond,  with  security  to  be  approved  by  the  board  of  directors,  in 
the  penal  sum  of dollars,  conditioned  for  the  honest  and  faithful  dis- 
charge of  his  duties,  and  that  he  will  faithfully  apply,  account  for,  and  pay 
over  all  moneys,  property,  and  funds  of  every  description  pertaining  to  tl:is 
bank  that  may  come  into  his  hands  by  virtue  of  his  office  as  teller,  to  the 
order  of  the  board  of  directors,  or  to  such  person  or  persons  as  may  be 
authorized  by  the  board  to  receive  the  same.  . 

II. — The  bonds  of  the  officers  shall  be  placed  in  the  custody  of  a  stock- 
holder of  this  bank,  to  be  designated  by  the  board  of  directors,  who  shall  not 
be  one  of  the  bonded  officers,  to  be  surrendered  by  him  only  upon  the  order 
of  the  board. 

12. — The  impression  made  below  is  an  impression  of  the  seal  adopted  by 
the  board  of  directors  of  this  bank. 

\_Impression  of  Seal."] 

13. — All  transfers  and  conveyances  of  real  estate  shall  be  made  by  the 
bank,  under  the  seal  thereof,  in  accordance  with  the  orders  of  the  board  of 
directors,  and  shall  be  signed  by  the  president  or  cashier. 

14. — Whenever  an  increase  of  stock  shall  be  determined  upon  in  accord- 
ance with  the  articles  of  association  of  this  bank,  it  shall  be  the  duty  of  the 
board  of  directors  to  cause  all  the  stockholders  to  be  notified  thereof,  and  a 
subscription  to  be  opened  therefor,  specifying  the  teiTns  of  payment  agreed 
upon  by  subscribers.  Each  stockholder  shall  be  entitled  to  subscribe  for 
shares  of  the  new  stock  in  proportion  to  the  number  of  shares  he  already  owns ; 
but  if  any  stockholder  shall  fail  to  subscribe  for  such  new  stock  as  he  may 
be  entitled  to,  or  to  pay  his  subscription  according  to  agreement,  the  board 
of  directors  shall  determine  what  disposition  shall  be  made  of  the  privileges 
of  subscribing  for  the  new  stock  not  taken. 

15. — This  bank  shall  be  open  for  business  from o'clock  A.  M.  to 

o'clock  p.  M.  each  day,  except  Sundays  and  days  recognized  by  the  laws  of 
this  State  as  holidays. 

16. — The  board  of  directors  of  this  bank  shall  hold  regular  meetings  at 

the  banking-house  for  the  transaction  of  business  on of  each  week, 

and  should  th;it  day  in  any  year  fall  upon  a  holiday,  the  regular  meeting  for 
that  week  shall  be  held  on  such  other  day  as  the  directors  at  the  preceding 
meeting  may  order. 

The  board  may  also  hold  special  meetings  upon  the  call  of  the  president, 
cashier,  or  any  three  or  more  members,  and  whenever  there  shall  not  be  a 
quorum  at  a  regular  or  special  meeting,  the  members  present  may  adjourn 
the  meeting  from  day  to  day  until  a  quorum  shall  be  obtained;  and  any 
meeting  may  be  adjourned  from  time  to  time  by  a  vote  of  a  majority  of  a 


219 

quorum  present,  but  no  business  except  adjournment  shall  be  transacted  in 
the  absence  of  a  quorum. 

17. — There  shall  be  a  committee,  to  be  known  as  the"  exchange  commit- 
tee, consisting  of  the  president, directors,  and  cashier,  who  shall  have 

power  to  discount  and  purchase  bills,  notes,  and  other  evidences  of  debt,  and 
to  buy  and  sell  bills  of  exchange;  and  who  shall,  at  each  regular  meeting  of 
the  board  of  directors,  make  a  report  of  all  bills,  notes,  and  other  evidences 
of  debt  discounted  and  purchased  by  them  for  the  bank  since  their  last  pre- 
vious report. 

18. — The  board  of  directors  may  appoint  one  of  its  members  or  an  officer 
of  the  bank  to  act  as  clerk  at  its  meetings. 

19. — No  officer  or  clerk  of  this  bank  shall  pay  any  check  drawn  upon  it, 
or  pay  out  money  on  any  order,  unless  the  drawer  of  such  check  or  order 
shall,  at  the  time  of  the  presentation  thereof,  have  on  deposit  in  the  bank 
funds  sufficient  to  meet  such  check  or  order. 

20. — The  earnings  of  this  bank  shall  be  disposed  of  according  to  orders  of 
the  board  of  directors,  made  at  regular  or  special  meetings,  and  no  dividend 
shall  be  paid  to  stockholders,  or  other  disposition  of  earnings  made,  except 
upon  order  of  the  board. 

21. — The  organization  papers  of  this  bank,  as  executed  and  filed  with  the 
Comptroller  of  the  Currency,  the  returns  of  judges  of  the  elections,  the  jiro- 
ceedings  at  all  regular  and  special  meetings  of  the  board  of  directors,  the 
by-laws,  and  all  changes  and  all  amendments  thereof,  and  the  report  of 
examining  committees  of  directors,  made  according  to  law  28,  shall  be 
recorded  in  the  minute-book;  and  the  minutes  of  each  meeting  of  the  board 
shall  be  signed  by  the  president  and  attested  by  the  cashier. 

22. — The  board  of  directors  shall  have  power  to  prescribe  and,  when  ex- 
pedient, to  change  the  form  ot  books  and  accounts  to  be  used  in  the  transac- 
tion of  the  business  of  this  bank,  and  to  prescribe  the  general  or  particular 
manner  in  which  its  affairs  shall  be  conducted. 

23. — The  stock  of  this  bank  shall  be  assignable  and  transferable  only  on 
the  books  of  this  bank,  subject  to  the  restriction  and  provisions  of  the  bank- 
ing laws,  and  a  transfer  book  shall  be  provided,  in  which  all  assignments 
and  transfers  of  stock  shall  be  made. 

24. — Transfers  of  stock  shall  not  be  suspended  preparatory  to  the  declara- 
tion of  dividends ;  and  unless  an  agreement  to  tlie  contrary  shall  be  expressed 
in  the  assignments,  dividends  shall  be  paid  to  the  stockholders  in  whose 
name  the  stock  shall  stand  at  the  date  of  the  declaration  of  dividends. 

25. — Certificates  of  stock  signed  by  the  president  and  cashier  sh:ill  be 
issued  to  stockholders,  and  the  certificates  shall  state  upon  their  face  that 
the  stock  is  transferable  only  on  the  books  of  the  bank. 

26.— All  the  current  expenses  of  this  bank  shall  be  paid  by  the  c;ishier, 
who  shall,  every  six  months,  or  oftener  if  required,  make  to  the  board  of 
directors  a  detailed  statement  thereof. 


220 

27. — All  contracts,  checks,  drafts,  etc.,  for  this  bank,  and  all  receipts  for 
circulating  notes  received  from  the  Comptroller  of  the  Currency,  shall  be 
signed  by  the  president  or  cashier. 

28. — There  shall  be  appointed  by  the  board  of  directors  a  committee  of 

members  thereof,  whose  duty  it  shall  be  to  examine  every  three  months 

the  affairs  of  this  bank,  to  count  its  cash,  and  compare  its  assets  and  liabili- 
ties with  the  accounts  of  the  general  ledger,  ascertain  whether  these  accounts 
and  all  others  are  correctly  kept,  whether  the  condition  of  the  bank  cor- 
responds therewith,  and  whether  the  bank  is  in  a  sound  and  solvent  condi- 
tion, and  to  recommend  to  the  board  such  changes  in  the  manner  of  doing 
business,  etc.,  as  shall  seem  to  be  desirable,  the  result  of  Avhich  examination 
shall  be  reported  to  the  board  at  the  next  regular  meeting  thereafter. 

29. — A  majority  of  the  directors,  including  the  president,  (or  in  his  absence 
the  vice-president,)  shall  be  a  quorum  to  do  business. 

30. — A  copy  of  the  by-laws  of  this  bank  as  in  force  shall  be  kept  in  a  con- 
venient place  in  the  bank,  to  which  any  stockholder  shall  have  free  access 
during  the  regular  hours  of  business. 

31. — These  by-laws  may  be  changed  or  amended  by  the  vote  of  two-thirds 
of  the  directors. 

Where  there  is  any  conflict  between  the  law  and  articles  of  association,  or 
between  the  by-laws  and  either  of  the  other  two,  the  law  takes  precedence, 
the  articles  of  association  stand  next,  and  the  by-laws  must  give  way  to  both. 


22) 


THE  MANAGEMENT  OF  NATIONAL  BANKS. 

Brief  Suggestions. 

Bank  Records. — In  all  corporate  bodies  the  recording,  and 
careful  preservation  of  the  record  of  proceedings  of  all  meetings 
lield,  is  of  the  utmost  importance. 

Have  the  organization  papers  executed  in  duplicate  and  one  set 
incorporated  in  the  minute-book  as  part  of  the  record  of  action 
taken.  Also  have  the  proceedings  of  stockholders,  in  the  first 
election  of  directors  fully  recorded,  so  that  there  may  be  in  per- 
manent form  a  complete  history  of  the  organization  of  the  bank. 

The  by-laws  and  all  proceedings  at  meetings  of  directors  and  of 
stockholders  should  also  be  recorded  in  the  minute-book.  These 
records  should  very  explicitly  set  forth,  the  appointment  of  the 
judges  of  election  for  directors,  and  the  returns  of  the  judges  ;  and 
the  fact  that  the  directors  qualified  by  taking  the  prescribed  oath, 
(the  7-ecording  of  this  fact  is  too  often  omitted.  The  importance 
of  it  is  evident,  as  showing  that  the  directors  qualified  as  required, 
before  transacting  any  business,)  the  appointment  of  oflScers  should 
also  be  recorded,  the  bonds  required  of  them,  and  the  approval 
thereof  by  the  directors ;  in  short,  all  matters  pertaining  to  the 
original  organization  of  the  bank,  and  the  subsequent  proceed- 
ings of  the  directors  in  the  supervision  and  management  of  its 
affairs. 

Appointment  and  Bonds  of  Officers. — The  officers,  other 
than  the  president,  should  be  appointed  to  hold  their  offices  indefi- 
niteh^  and  their  bonds  should  be  executed  accordingly,  so  as  to 
obviate  the  necessity  of  requiring  annual  bonds  from  them,  and 
to  prevent  the  occurrence  of  a  time  when  they  would  not  be  under 
bond. 

Presidents  being  annually  appointed,  should  be  required  to  give 
annual  bonds ;  and  in  the  appointment  or  reappointment  of  any 
officer  a  bond  should  be  required  of  him.  It  will  be  found  the 
best  policy  to  pay  all  officers  and  other  employes  liberal  but  not 
extravagant  salaries,  so  as  to  remove  from  them  the  temptation  of 
speculating  with  or  otherwise  wrongly  using  the  bank's  funds. 

Qualifications  for  the  Banking  Business. — It  should  be 
remembered  that  integrity,  force,  ability,  faithfulness,  promptness. 


222 

carefulness  and  courtesy  tell  in  banking,  as  well  as  in  any  other 
business,  on  the  other  hand  traits  and  conduct  of  the  opposite 
character  insure  failure,  but  given  these  qualities  in  good  measure 
in  officers  and  clerks  success  is  assured.  One  specially  important 
thing  to  bear  in  mind  in  banking,  is  that  new  phases  of  business 
are  constantly  developing,  and  the  most  successful  and  most  use- 
ful bank  is  the  one  which  most  quickly  adapts  itself  to  the  times. 

Capital. — The  capital  of  a  bank  should  be  a  reality,  not  a 
fiction,  and  it  should  be  owned  by  those  who  have  money 
to  lend  and  not  by  borrowers.  No  bank  can  have  a  prosperous 
career  if  its  stockholders  take  out  in  loans,  the  money  they  have 
put  in  as  capital,  for  such  a  bank,  being  rendered  unable  to  accom- 
modate the  business  public  outside  of  its  owners,  deprives  itself 
of  one  of  the  principal  elements  of  success. 

Directors. — The  Board  of  Directors  is  the  representative  body 
of  the  shareholders  of  the  bank  and  as  such  is  responsible  for  the 
administration  of  its  affairs.  The  greatest  obligation  therefore 
rests  upon  each  director,  having  accepted  the  office,  to  inform 
himself  fully  of  his  duties,  and  the  requirements  of  the  law  gov- 
erning the  bank,  also  to  take  a  personal  interest  in  the  officers  and 
their  methods  of  discharging  their  duties,  and  in  that  most  import- 
ant matter  of  looking  after  the  investments  of  the  bank,  not  to 
favor  granting  a  loan  he  would  not  make  from  his  own  funds. 

President. — The  work  of  a  bank  President  varies  according  to 
circumstances.  He  may  or  may  not  share  in  the  active  manage- 
ment of  the  bank.  As  a  rule,  it  may  be  said,  he  exercises  a 
general  oversight  of  the  affairs  of  the  bank,  with  special  duties  in 
connection  with  his  position  as  President  of  the  Board  of  Directors. 

Cashier. — The  bank  Cashier  is  usually  the  chief  executive 
officer  of  the  bank.  Primarily  he  represents  the  will  of  the 
Board  of  Directors  and  his  duty  is  to  see  that  the  policy  and 
plans  formulated  by  it  are  properly  carried  into  execution,  yet  he 
is  not  the  mere  representative  and  subordinate  of  the  Board,  but 
has  also  responsibilities  as  the  chief  executive  officer  and  agent  of 
the  corporation.  He  should  be  thoroughl}'  conversant  with  the 
laws,  customs  and  practices  of  the  banking  business,  and  especially 
of  those  of  his  office.     He  should   maintain  a  vigilant  oversight 


22:5 

of  all  the  work  of  his  suburdi nates,  being  responsible  for  the 
good  conduct  and  faithful  service  of  the  clerical  force  of  the  bank. 
To  the  public,  the  bank  is  what  the  Cashier  is ;  therefore  while 
keeping  uppermost  in  mind  tlie  trust  committed  to  him,  he  must 
recognize  the  bank's  obligations  to  the  public,  upon  which  it  is 
dependent  for  its  profits.  He  should  be  known  as  one  always 
approachable,  and  ready  to  consider  carefully  the  wants  of  the 
bank's  customers  and  as  ready  to  respond,  generously,  so  far  as 
consistent  with  his  best  judgment,  and  if  unable  to  favor  the  cus- 
tomer, to  manifest  by  kindly  manner  his  regret. 

He  should  not  let  political  or  other  prejudices  influence  his  con- 
duct of  the  afifairs  of  the  bank,  but  manage  it  as  a  business  insti- 
tution, for  the  benefit  of  the  cotumunity  and  the  profit  of  the 
stockholders. 

Loans  and  Discounts. — Require  ample  and  undoubted  security 
for  all  loans  and  of  a  readil)'-  convertible  character  if  in  the  shape 
of  collaterals.  Do  nothing  to  foster  or  encourage  speculation,  but 
give  facilities  only  to  legitimate  business  operations.  Make  loans 
and  discounts  on  as  short  time  as  the  needs  of  customers  will 
permit,  and  insist  upon  the  payment  of  all  paper  at  maturity,  if 
possible,  whether  the  bank  needs  the  money  or  not.  Borrowers 
should  not  be  encouraged  to  expect  extensions  and  renewals  of 
their  paper  to  suit  their  own  convenience.  Such  favors  are  not  the 
attributes  of  good  banking,  the  proper  foundation  of  which  is 
impartiality  of  treatment,  and  the  exaction  of  the  performance  of 
contracts.  Never  renew  a  note  or  bill,  or  allow  it  to  lie  unpaid, 
merely  because  the  money  can  not  for  the  moment  be  placed  with 
equally  good  advantage,  for  it  is  only  by  always  requiring  prompt 
settlements  that  the  discount  line  can  be  controlled,  and  made  at 
all  times  reliable. 

Distribute  the  accommodations  of  the  bank  as  widely  as  possi- 
ble, rather  than  concentrate  them  in  a  few  hands ;  for  large  loans, 
though  sometimes  proper,  are  generally  injudicious,  and  frequently 
unsafe,  for  large  borrowers  are  apt  to  dictate  their  own  terms  as 
regards  payment ;  and  when  this  is  the  relation  between  a  bank 
and  its  customer,  the  former  is  pretty  sure  to  be  the  sufferer. 

Every  dollar  of  depositors'  money  loaned  by  a  bank  is  owed 
for,  and  its  managers  are  therefore  under  the  strongest  obligations 
to  its  creditors  as  well  as  to  stockholders  to  keep  its  discounts 
under  their  own  control. 


224 

Paying  Teller. — The  Paying  teller  occupies  a  position  of  great 
importance,  being  the  disbursing  ofi&cer  of  the  bank,  and  having 
charge  of  its  funds.  He  should  be  a  man  above  reproach,  a  good 
judge  of  character,  of  quick  wit,  quick  action,  and  the  soul  of  good 
nature  and  forbearance. 

Receiving  Teller. — The  Receiving  teller  holds  a  position 
closely  related  to  the  paying  teller  and  involving  great  responsi- 
bility. He  should  possess,  besides  strict  integrity,  good  ability  and 
a  courteous  manner,  a  natural  tact  for  handling  money  and  of 
passing  on  its  genuineness. 

Bookkeeper. — Very  great  responsibility  rests  upon  the  book- 
keeper since  the  paying  out  of  the  funds  of  the  bank  is  governed 
by  his  records.  He  should  be  therefore  an  accountant  of  great 
accuracy,  understanding  thoroughly  bank  book-keeping,  and 
keeping  abreast  of  the  times  in  adopting  improved  methods. 

Clerical  Force. — The  Clerical  force  should  be  character- 
ized by  fidelity  and  efi&cient  service,  and  of  this  there  should  be 
due  recognition  by  the  officers  of  the  bank  in  a  kindly  word  of 
appreciation  from  time  to  time,  and,  better  still,  an  increase  of  sal- 
ary or  an  extra  allowance  occasionally  when  good  dividends  are 
declared. 

Verification  of  \A^ork. — One  of  the  best  rules  for  a  bank  to 
adopt,  is,  that  the  work  of  each  employee  be  examined  and  veri- 
fied daily  by  shifting  of  clerks,  under  the  direction  of  the  execu- 
tive officer,  and  that  occasionally  full  examinations  of  the  bank  be 
made  in  the  same  manner.  As  often  as  every  quarter  a  committee 
of  directors,  appointed  for  the  purpose,  should  make  an  examina- 
tion, and  a  report  thereof  should  be  entered  upon  the  minute-book. 

Stock  Certificates. — The  greatest  care  should  be  exercised  in 
regard  to  stock  certificates  and  transfers,  and  when  new  certificates 
are  issued  to  see  that  tliose  in  lieu  of  which  they  are  given  are 
promptly  surrendered  and  cancelled. 

Collaterals. — The  stocks,  bonds,  &c.,  held  by  banks  as  collat- 
eral security,  should  be  regarded  as  special  trusts,  and  hence 
carefully  recorded  and  placed  in  the  bank's  vaults,  where  only  the 
officer  entrusted  with  their  care  can  have  access  to  them. 


225 

Legal  Attorney. — It  is  an  excellent  plan  for  banks  to  have  a 
special  attorney,  possibly  retained  by  the  year,  so  that  the  execu- 
tive officer  of  the  bank  may  be  able  to  comraand  counsel  and  decide 
with  promptness  questions  constantly  arising  which  require 
knowledge  of  the  law. 

Surplus  Fund. — It  should  be  the  chief  aim  of  bank  managers 
to  make  their  respective  institutions  strong,  and  to  keep  them  free 
from  unavailable  and  undesirable  assets.  Not  only  should  the 
capital  be  kept  unimpaired,  but  a  surplus  fund  should  be  created 
from  the  earnings  that  will  be  a  protection  to  the  capital  and  to 
creditors  in  the  trying  times  that  sooner  or  later  overtake  all 
banking  institutions.  There  are  few  items,  if  any,  that  look 
better  upon  a  balance  sheet  of  a  bank  than  a  large  surplus,  and 
none  that  is  so  well  calculated  to  secure  for  it  public  confidence ; 
and  it  is,  therefore,  on  all  accounts  the  best  policy  to  accumulate 
such  a  fund  as  rapidly  as  possible,  even  if  dividends  to  stock- 
holders have  to  be  kept  down  to  a  low  rate  for  a  time. 

Reports. — The  instructions  given  by  the  Comptroller  of  the 
Currency  in  regard  to  reports  to  be  made  to  his  office,  should  be 
very  closely  followed ;  the  blanks  furnished  by  the  Comptroller 
state  very  explicitly  what  is  required,  but  very  frequently  reports 
are  found  by  him  to  be  incomplete,  necessitating  much  correspond- 
ence. This  may  be  easily  avoided  by  seeing  that  the  reports  are 
correct  before  forwarding. 

In  Conclusion. — Do  a  straightforward,  legitimate,  and  upright 
business,  and  never  be  tempted  by  the  prospect  of  large  gains  to 
engage  in  operations  not  sanctioned  by  prudence,  or  by  the  pro- 
visions of  the  laws  governing  National  banks. 
'5 


CHAPTER  II. 


VOLUNTARY  LIQUIDATION. 


MODE    OF    PROCEDURE. 

The  law  authorizes  any  National  bank  to  go  into  liquidation  by 
a  vote  of  its  shareholders  owning  two-thirds  of  its  stock.  (Re- 
vised Statutes,  5220.)  Nothing  is  said  in  the  statute  about  any 
consent  of  the  Comptroller  of  the  Currency  ;  but  it  will  be  found 
to  facilitate  the  proceedings  to  give  him  notice  in  advance,  that  he 
may  cause  an  examination  of  the  bank  to  be  made ;  for  until  he  is 
satisfied  by  such  an  examination  that  the  bank  is  solvent,  he  will 
not  consent  to  the  withdrawal  of  the  bonds  of  the  bank  deposited 
with  the  U.  S.  Treasurer. 

The  vote  of  the  stockholders  should  be  taken  at  a  meeting  called 
for  the  purpose  in  the  manner  provided  for  in  the  articles  of  asso- 
ciation or  by-laws.  If  the  articles  are  in  the  usual  form  this  may 
be  done  by  publishing  notice  of  the  meeting  for  thirty  days  in  a 
newspaper  published  in  the  town,  city  or  county  where  the  bank 
is  located,  or  by  mailing  to  each  shareholder  notice  in  writing 
thirty  days  before  the  time  fixed  for  the  meeting.  The  notice 
should  expressly  state  that  the  purpose  of  the  meeting  is  to 
consider,  and  to  vote  upon,  the  question  of  placing  the  bank  in 
liquidation.  It  is  necessary  that  shareholders  owning  at  least 
two-thirds  of  the  stock  vote  in  favor  of  the  liquidation  ;  the  share- 
holders may  vote  by  proxj^  at  this,  as  well  as  at  other  meetings, 
but  a  director  or  other  officer  of  the  bank  is  prohibited  by  law 
from  acting  as  such  proxy. 

It  is  usually  more  convenient  to  fix  some  day  in  the  future  as 
the  day  from  which  liquidation  is  to  commence. 

The  resolution  to  go  into  liquidation  should  read  as  follows* 

Resolved,  That  The National  Bank  be  placed  in  voluntary  liquida- 
tion under  the  provisions  of  sections  5220  and  5221,  United  States  Revised 
Statutes,  to  take  effect ,  18 — . 

There   may  be   prefixed  to  the  resolution   such  recital  of  the 

reasons  for  the  action  of  the  shareholders  as   they  may  deem 

appropriate. 
226 


22/ 

The  evidence  to  be  furnished  the  Comptroller  of  the  Currency 
of  the  fact  of  liquidation  is  a  copy  of  the  resolution  of  the  share- 
holders ;  a  certificate  of  the  cashier  or  president,  that  share- 
holders owning  two-thirds  of  the  stock  have  voted  to  place  the 
bank  in  liquidation,  and  a  copy  of  the  notice  calling  the  meeting, 
showing  date  of  mailing  or  publication,  all  of  which  should  be 
under  seal  of  the  bank.  Notice  to  note-holders  and  other  creditors 
to  present  their  claims  for  payment  should  be  published,  as 
required  by  Section  5221  of  the  Revised  Statutes,  for  a  period  of 
two  months  in  a  newspaper  published  in  the  city  of  New  York,  and 
also  in  a  newspaper  published  in  the  city  or  town  in  which  the 
bank  is  located.  Notice  in  a  weekly  paper  is  sufl&cient.  The  bonds 
can  be  withdrawn  as  soon  as  the  liquidation  begins,  provided 
the  Comptroller  of  the  Currency  is  satisfied  that  the  bank  is 
solvent,  but  the  bank  must  first  deposit  with  the  Treasurer  of  the 
United  States  sufficient  lawful  money  to  retire  all  its  outstanding 
circulating  notes.  This  deposit  must  be  made  within  six  months 
from  date  of  going  into  liquidation.  (Sec.  5222.)  If  there  is  any 
tax  due  on  the  circulation,  the  Treasurer,  before  he  will  release  the 
bonds,  requires  a  return  to  be  made  of  the  average  amount  of  such 
notes  in  circulation.  The  amount  found  due  for  such  tax  is  usually 
taken  out  of  the  bank's  5  per  cent.  fund.  Until  the  lawful  money 
deposit  is  made  to  retire  circulation  a  bank  must  maintain  its  5  per 
cent.  fund. 

When  the  bank  has  been  placed  in  liquidation  it  can  not  transact 
any  new  business ;  and  the  power  of  its  officers  to  bind  it  by  trans- 
action afterwards  is  only  that  which  results  by  implication  from 
the  duty  to  wind  up  and  close  its  affairs,  and  there  is  no  authority 
on  the  part  of  the  officers  of  the  bank  to  transact  any  business  in  the 
name  of  the  bank  so  as  to  bind  its  shareholders,  except  that  which 
is  implied  in  the  duty  of  liquidation.  (Richmond  v.  Irons,  121  U- 
S. ,  27;  Schroder  v.  Manufacturers'  National  Bank,  133  U.  S.,  67.) 

The  following  are  copies  of  the  forms  furnished  b}'  the  Comp- 
troller of  the  Currency  for  voluntary  liquidation : 

Resolution  for  Voluntary  Liquidation. 

The National Bank  of , ,  189—. 

At  a  meeting  of  the  shareholders  of  the National Bank  of 

,  held  on ,  189 — ,  thirty  days'  notice  of  the  proposed  business 

having  been  given,  at  which sliareholders  were  present  in  person,  and 

by  proxy,  representing shares  of  the  stock  of  this  association, 

it  was — 


228 

Resolved,  That  "  The National Bank  "  be  placed  in  volun- 
tary liquidation,  under  the  provisions  of  sections  5220  and  5221,  United 
States  Revised  Statut0|i,  to  take  effect ,  189 — . 

The  above  resolution  was  adopted  by  the  following  vote,  representing  two- 
thirds  of  the  capital  stock  of  the  association : 


Name. 


Residence. 


No.  of  Shares. 


Total  Number  of  Shares 


I  hereby  certify  that  the  above  is  a  true  and  correct  report  of  the  vote  and 
of  the  resolution  adopted  at  a  meeting  of  the  shareholders  of  this  bank  held 

on ,  189 — . 

[seal  of  bank.] ,  President  or  Cashier. 

Subscribed  and  sworn  to  before  me,  this day  of ,  A.  D.  i8g — . 

[seal  of  notary.]  ,  Notary  Public. 

Notice  to  Comptroller  of  Liquidation. 

To  the  Comptroller  of  the  Currency, 

Sir:  It  is  hereby  certified,  in  pursuance  of  sections  5220  and  5221  of  the 
Revised  Statutes  of  the  United  States,  that  at  a  meeting  of  the  stockholders 

of  the ,  located  at ,  in  the  State  of ,  duly  notified  and  held 

pursuant  to  law  and  the  articles  of  association  of  said  bank,  at  the  ofifice  of 

said  association  at aforesaid,  on  the day  of ,  189 — ,  it  was 

voted  by  the  stockholders  of  said  association  owning  two-thirds  of  its  stock, 
that  said  association  go  into  liquidation  and  be  closed. 

In  testimony  whereof  I  have,  by  instruction  of  the  board  of  directors  of 
said  association,  hereto  subscribed  my  name  and  affixed  the  seal  of  said 
association  at aforesaid,  the  day  and  year  above  written. 

[seal  of  the  b.^nk.] ,  President  or  Cashier. 

Notice  to  Creditors  and  Note  Holders. 
The National  Bank ,  located  at ,  in  the  State  of , 


is  closing  up  its  affairs.  All  note-holders  and  others,  creditors  of  said  asso- 
ciation, are  therefore  hereby  notified  to  present  the  notes  and  other  claims 
against  the  association  for  payment. 

Dated ,  189 — .  President  or  Cashier. 

[See  section  5221,  Revised  Statutes.  A  certificate  of  the  publisher  that  the 
required  publication  has  been  made,  together  with  a  slip  containing  notice 
from  one  issue  of  each  paper,  should  be  sent  to  the  office  of  the  Comptroller 
of  the  Currency.] 


CHAPTER    III. 


EXTENSION  OF  CORPORATE  EXISTENCE. 


The  Act  of  July  i2tli,  1882,  provides  that  any  National  Banking 
Association  may,  at  any  time  within  the  two  years  next  previous 
to  the  date  of  the  expiration  of  its  corporate  existence  under  pre- 
sent law,  and  with  the  approval  of  the  Comptroller  of  the  Cur- 
rency, extend  its  period  of  succession  by  amending  its  articles  of 
association  for  a  term  of  not  more  than  twenty  years.     The  date 
of  expiration  of  the  old  charter  is  determined  by  the  date  of  execu- 
tion of  the  organization  certificate,  as  Section  5136  of  the  Revised 
Statutes  provides  that  all  associations  organized  under  it  shall 
have  succession  for  twenty  years  from  the  date  of  the  execution  of 
their  organization  certificates.     If  the  paper  is  lost,  or  the  date  in 
any  way  uncertain,  information  can  be  obtained  on  application  to  the 
Comptroller  of  the  Currency.   Under  the  Act  of  July  12th,  1882,  and 
the  regulations  of  the  Comptroller's  office,  banks  are  permitted  to 
file  their  application  for  extension  with  the  proper  papers  at  any 
time  within  sixty  days  prior  to  their  expiration,  and  the  necessary 
blank  will  be  sent  from  that  office  a  sufficient  time  in  advance  to 
enable  them  to  do  so. 
The  following  are  copies  of  the  forms  : 

Amendment  to  Articles  of  Association. 

National  Bank . 


In  accordance  with  and  in  pursuance  of  the  provisions  of  "  An  Act  to 
enable  National  Banking  Associations  to  extend  their  corporate  existence, 
and  for  other  purposes,"  approved  July  12,  1882,  we,  the  undersigned,  share- 
holders of  "  The ,"  located  at ,  in  the  county  of and  State 

of ,  owning  the  shares  of  the  capital  stock  of  said  association  set  oppo- 
site our  respective  names,  aggregating  not  less  than  two-thirds  of  the  stock 
of  said  association,  the  total  number  of  shares  representing  the  capital  stock 

of  said  National  banking  association  being shares,  do  hereby  consent 

and  agree  that  the article  of  the  articles  of  association  of  said  National 

banking  association  be,  and  is  hereby,  amended  to  read  as  follows : 

*  For  Act  of  April  12,  1902,  providing  for  re-extension  of  corporate  existence, 

see  page  319. 

229 


230 


"This  association  shall  continue  until 


-,  19 — ,  unless  sooner  placed 


in  voluntary  liquidation  by  the  act  of  its  shareholders  owning  at  least  two- 
thirds  of  its  stock,  or  otherwise  dissolved  by  authority  of  law." 

In  witness  whereof,  we  the  undersigned,  have  hereto  set  our  hands. 


Date 
of  Signing. 


Name. 


Address. 


No.  of  Shares. 


Certificate  of  Amendment  of  Article. 

Sir:  I  do  hereby  certify,  in  pursuance  of  the  provisions  of  "An  Act  to 
enable  National  Banking  Associations  to  extend  their  corporate  existence, 
and  for  other  purposes,"  approved  July  12,  1882,  that  the  amendment  of  the 

articles  of  association  to  which  this  certificate  is  attached  of  "  The ," 

and  the  consent  to  the  same  in  writing,  was  executed  in  duplicate  by  share- 
holders owning  not  less  than  two-thirds  of  the  stock  of  said  bank;  and  I  do 
further  certify  that  the  signatures  of  the  shareholders  to  said  consent  and 
said  amendment  of  the  articles  of  association  are  the  true  and  correct  signa- 
tures of  said  shareholders  or  of  their  lawfully  appointed  attorneys ;  and  that 
one  of  the  instruments  so  executed  is  the  foregoing,  and  that  the  other,  in  all 
respects  like  the  foregoing,  is  on  file  in  said  bank. 

[seal  OF  BANK.]  , 


President  or  Cashier. 


To  the  Comptroller  of  the  Currency, 

Washington,  D.  C. 


18- 


SlR :  I  certify  that  the  said  amendment  to  the  articles  of  association  of 

"  The  "  was  duly  recorded  upon  the  minute-book  of  said  association 

on  the day  of  ,  18 — ,  and  that  the  above  certificate  was  certified 

under  the  seal  of  the  association  in  accordance  with  a  resolution  of  its  board 

of  directors,  duly  adopted  at  a  meeting  of  said  directors  on  the day  of 

,  1 8-. 

[seal  of  bank.]  , 

To  the  Comptroller  of  the  Currency, 

Washington ,  D.  C. 


Cashier. 


Sir  :  I  hereby  request  the  Comptroller  of  the  Currency  to  approve  the 
enclosed  amendment  of  the  articles  of  association  of  this  bank,  extending  its 
corporate  existence  for  twenty  years,  pursuant  to  the  provisions  of  the  act  of 
Congress  entitled  "An  Act   to   enable   National   Banking  Associations   to 


231 

extend  their  corporate  existence,  and  for  other  purposes,''  approved  July  12, 
1882. 
The  amendment  is  accompanied  by  the  certificate  required  by  law. 

Very  respectfully, , 

President  or  Cashier. 
To  the  Comptroller  of  the  Currency, 

Washington,  D.  C. 

The  law  does  not  require  that  a  meeting  of  the  stockholders  shall 
be  held ;  it  is  sufficient  to  secure  the  consent  of  those  representing 
two- thirds  of  the  stock,  and  this  may  be  done  by  sending  in  ad- 
vance to  each  stockholder  a  power  of  attorney  to  be  signed  and 
returned  by  him,  some  person  other  than  any  officer  of  the  bank 
being  empowered  to  act  as  attorney.  The  following  form  may  be 
used  for  this  purpose : 

Know  all  men  by  these  presents  : 

That  I, ,  of ,  hereby  constitute  and  appoint  irrevocably 

my  true  and  lawful  attorney,  for  me  and  in  my  name  and  stead  to  sign  all 
necessary  papers  in  connection  with  the  extension  of  the  corporate  existence 

of  the  ,  under  the  act  of  Congress  approved  July   12,    1882,  and   I 

hereby  consent  that  tlie article  of  the  articles  of  association  of  The 

be  so  amended  as  to  read  as  follows : 

"  This  association  shall  continue  until  close  of  business  on ,  unless 

sooner  placed  in  voluntary  liquidation  by  the  act  of  its  shareholders  owning 
at  least  two-thirds  of  its  stock,  or  otherwise  dissolved  by  authority  of  law." 

Hereby  granting  unto  my  said  attorney  full  power  and  authority  to  act  in 
and  concerning  the  premises  as  fully  and  efifectually  as  I  might  do  if  person- 
ally present. 

In  witness  whereof  I  have  hereunto  set  my  hand  and  seal  this day  of 

,  in  the  year  one  thousand  eight  hundred  and  eighty-two. 


Signed  and  sealed  in  presence  of 


These  powers  of  attorney,  signed  by  the  stockholders,  should  be 
sent  to  the  Comptroller  with  the  amendment  to  the  articles  of  asso- 
ciation on  which  their  names,  signed  by  their  authorized  attorneys, 
appear. 

If  preferred,  a  stockholders'  meeting  maj'  be  called  for  a  con- 
venient date  in  order  to  vote  for  the  extension  and  to  sign  the 
necessary  papers. 

Notice  of  the  meeting  should  be  sent  by  mail  to  each  stockholder, 
and  may  also  be  announced  by  publication.  At  this  meeting  the 
stockholders  may  appear  in  person  or  by  attorney,  the  power  given 


232 

to  the  latter  being  similar  in  form  to  that  inserted  above.  In  exe- 
cuting and  forwarding  the  papers  the  following  instructions  must 
be  strictly  observed : 

The  certificate  of  the  president  or  cashier,  certifying  that  stock- 
holders owning  at  least  two-thirds  of  the  stock  have  consented,  in 
writing,  to  the  amendment,  should  be  executed,  in  duplicate,  and 
one  copy  transmitted  to  the  Comptroller,  together  with  the  letter 
applying  for  approval  of  the  Comptroller,  at  least  one  month 
previous  to  the  expiration  of  the  corporate  existence  of  the  bank, 
in  order  that  the  Comptroller  may  have  sufficient  time  to  cause  the 
special  examination  to  be  made,  as  required  by  Section  3  of  the 
Act  of  July  1 2th,  1882. 

If  any  shares  of  the  bank  stand  in  the  name  of  administrators, 
executors,  trustees,  or  guardians,  and  it  becomes  necessary  to  have 
the  vote  of  these  shares  to  make  up  the  majority  required  to  au- 
thorize the  amendment,  duly  certified  copies  of  the  legal  appoint- 
ment of  such  administrators,  executors,  trustees,  or  guardians 
should  be  forwarded  to  the  Comptroller  of  the  Currency. 

When  stock  voted  for  the  amendment  stands  in  the  name  of  an 
assignee  there  must  be  evidence  showing  that  the  shares  of  stock 
have  been  regularly  transferred  to  him,  as  such  assignee,  on  the 
books  of  the  bank.  When  the  amendment  is  signed  by  an  attor- 
ney acting  for  shareholders,  properly  executed  powers  of  attorney 
must  be  furnished. 

Soon  after  the  papers,  properly  executed,  have  been  received  in 
his  office,  the  Comptroller  will  order  the  special  examination  re- 
quired by  Section  3.  This  examination  must  be  paid  for  by  the 
bank,  and  if  the  report  is  favorable  the  Comptroller  will  issue  his 
certificate  of  extension.  After  the  extension  has  been  granted, 
the  law  requires  that  all  circulating  notes  issued  to  the  bank  after 
the  date  at  which  the  new  period  of  succession  begins  shall  be  of 
different  devices  from  those  issued  before  ;  and  this  necessitates  the 
procuring  of  new  plates,  which  will  be  prepared  at  the  expense  of 
the  bank.  This  expense  will  be  ^50  for  each  plate  of  two  impres- 
sions and  $75  for  each  plate  of  four.     (See  'page  211.) 

A  blank  to  enable  banks  to  order  the  preparation  of  plates  for 
the  printing  of  new  circulation  will  be  furnished,  and  the  order 
should  be  made  out  and  sent  with  the  application  for  extension. 

No  transfer  of  bonds  is  necessary,  as  the  extended  association 
is  in  all  respects  identically  the  same  as  before  extension,  and  is 
merely  placed  in  the  same  position  as  if  the  law  had  allowed  it  at 


233 

the  outset  forty  years  from  the  date  of  its  organization,  of  which 
twenty  have  expired.  The  new  circulating  notes  will  be  issued 
as  the  old  come  in  by  the  usual  course  of  redemption,  until  the  end 
of  three  years  from  the  date  of  extension,  when  the  law  requires 
the  bank  to  deposit  lawful  money  for  the  redemption  of  such  por- 
tion of  the  old  circulation  as  may  then  remain  outstanding.  [The 
full  deposit  may  be  made  at  once  or  in  instalments,  or  at  end  of 
three  years.]  As  new  circulation  will  be  immediately  issued  in 
place  of  that  for  which  lawful  money  is  thus  deposited,  there  need 
be  little  inconvenience  on  this  account.  All  that  is  necessary  is  to 
see  that  the  printing  of  circulation  in  blank  is  ordered  in  advance, 
so  that  it  may  be  ready  when  wanted. 

Officers'  Bonds. — Although  the  bank  is  the  same  bank  after 
extension  as  before,  it  is  perhaps  best  to  renew  the  bonds  of  the 
officers,  tellers,  &c.,  as  there  might  be  a  question  whether  the 
sureties,  as  bondsmen  signing  before  the  extension,  could  claim 
they  were  not  liable  in  not  having  contemplated  the  existence  of 
the  bank  for  a  longer  term  than  twenty  years. 

Stockholders   Not  Desiring  to  Extend  the  Association. — 

Some  stockholders  may  not  vote  for  the  extension,  and  some 
may  wish  to  withdraw  the  amount  of  their  stock.  Section  5  of 
the  Act  of  Jul}'  12th,  1882,  provides  for  such  cases- 

Reorganization  May  be  Preferable. — The  foregoing  instruc- 
tions apply  to  the  extension  of  the  bank  on  a  condition  which 
legall}^  is  in  all  respects  identical  to  what  it  was  at  its  first  organi- 
zation. 

It  may,  however,  be  deemed  best  by  those  principally  interested 
in  National  banking  associations  about  to  expire  not  to  avail  them- 
selves of  the  foregoing  method.  The  reasons  for  this  are  obvious. 
In  a  twenty  years'  life  the  personnel  of  the  stockholders  of  an  as- 
sociation undergoes  great  changes.  The  stock  which  was  origin- 
ally in  the  hands  of  active  resident  business  men,  who  brought 
custom  and  business  to  the  bank,  by  various  vicissitudes  falls  into 
the  possession  of  widows,  heirs,  and  non-residents,  whose  only 
interest  in  the  institution  is  to  draw  dividends.  The  active  stock- 
holders remaining  in  such  a.s.sociations  will  doubtless  prefer  in 
many  instances  to  let  the  old  as.sociation  expire,  and,  with  their 
proportion  of  the  capital,  joining  v.ith  themselves  other  new  capi- 
talists such  as  they  may  think  will  add  strength,  form  a  new  asso- 


234 

elation  to  occupy  the  place  vacated  by  that  which  has  expired.  A 
proviso  iu  Section  5  of  the  Act  of  July  12th,  1882,  prevents  the 
use  of  the  old  name  for  such  a  new  association  unless  all  the  stock- 
holders in  the  old  bank  are  assigned  shares  in  the  new  bank  pro- 
portionately to  those  they  held  in  the  old.  It  will  therefore  be 
necessary  to  take  a  new  name  in  such  cases. 

The  new  associates  should  make  application  to  the  Comptroller, 
obtain  the  new  name  desired,  execute  articles  of  association  and  an 
organization  certificate,  and  file  these  papers,  with  an  order  for  cir- 
culation, in  the  office  of  the  Comptroller  of  the  Currency  about  a 
month  prior  to  the  expiration  of  the  existence  of  the  old  bank. 
Fifty  per  cent,  of  the  capital  should  be  paid  in,  so  as  to  be  certi- 
fied to  the  Comptroller  at  the  same  time  bonds  are  deposited^ 
which  should  be  done  a  few  days  before  the  old  bank  expires. 
Everything  being  ready,  the  new  bank  can  be  authorized  to 
commence  business  on  the  day  of  the  expiration  of  the  old  asso- 
ciation. 

The  stockholders  of  the  new  bank  can  put  into  it  such  moneys 
as  they  derive  from  the  old.  The  assets  of  the  old  bank  can  be 
sold  in  such  manner  by  its  directors  as  will  realize  the  most  for  its 
stockholders,  and  in  many  instances  it  is  advantageous  to  sell  to 
the  new  bank  such  portion  as  can  be  legally  taken  by  it.  It  can- 
not take  any  real  estate  except  banking  house.  It  is  likewise  for- 
bidden to  take  real  estate  paper  or  mortgages,  or  mortgage  paper ; 
and  it  cannot,  of  course,  take  any  paper  or  assets  of  any  kind 
known  to  be  bad  or  worthless.  No  old  stockholder  can  be  com- 
pelled to  take  stock  in  the  new  bank,  and  no  transfer  of  deposits 
can  be  made  from  the  books  of  the  old  bank  to  those  of  the  new 
without  the  consent  of  the  depositors,  manifested  by  their  deposit 
of  checks  on  the  old  bank. 

A  set  of  new  books  must  be  opened  by  the  new  association. 

Liquidation  of  Old  Association. — The  Act  of  July  12th,  1882, 
provides  that  the  liquidation  of  the  old  association  may  be  legally 
continued  after  its  expiration,  and  its  franchise  is  extended  for 
this  sole  purpose  imtil  all  its  assets  are  sold  and  the  proceeds  dis- 
tributed among  its  creditors  or  stockholders.  The  liquidation  is 
to  be  superintended  by  its  board  of  directors,  and  the  board  should 
be  kept  up  in  the  same  manner  as  in  a  bank  doing  business,  until 
all  moneys  have  been  collected  and  distributed. 

Banks  permitting  their  corporate  existence  to  expire  without 


235 

extension  are  required  to  furnish  notice  to  the  Comptroller's  oflBce, 
and  also  to  publish  notice.     [See  also  Supplement.] 

The  following  are  copies  of  the  forms  furnished  by  the  Comp- 
troller of  the  Currency : 

Certificate  of  Closing  on  Expiration  of  Charter. 

National  Bank , 

,  189-. 

To  the  Comptroller  of  the  Currency, 

Washington,  D.  C. 
Sir  :  It  is  hereby  certified,  in  pursuance  of  sections  5220  and  5221  of  the 
Revised  Statutes  of  the  United  States,  that  the  corporate  existence  of  "  The 

,"  located  at ,  in  the  State  of ,  having  expired  at  close  of 

business  on  the day  of ,  189-,  the  bank  is  now  closing  its  affairs 

under  the  provisions  of  section  7  of  the  Act  of  July  12,  1882. 

In  testimony  whereof,  I  have,  by  instruction  of  the  board  of  directors  of 
said  association,  hereto  subscribed  my  name  and  affixed  the  seal  of  said 

association  at aforesaid,  the  day  and  year  above  written. 

[seal  of  the  bank.]  , 

President  or  Cashier. 


Notice. 

The National  Bank ,  located  at ,  in  the  State  of , 

is  closing  up  its  affairs,  its  corporate  existence  having  expired  at  close  of 

business  on  the  day  of  ,   189-.     All   note- holders   and   others, 

creditors  of  said  association,  are  therefore  hereby  notified  to  present  the 
notes  and  other  claims  against  the  association  for  payment. 


President  or  Cashier. 
Dated ,  189-. 

Note, — The  above  notice  to  be  published  for  a  period  of  two  months  in  a 
newspaper  in  the  city  of  New  York,  and  also  in  a  newspaper  published  in 
the  place  in  which  the  bank  is  located.  See  section  5221,  Revised  Statutes. 
A  certificate  of  the  publisher  that  the  required  publication  has  been  made, 
together  with  a  slip  containing  notice  from  one  issue  of  each  paper,  should 
be  sent  to  the  office  of  the  Comptroller  of  the  Currency. 


CHAPTER  IV. 


NATIONAL  BANKS  AS  U.  S.  DEPOSITARffiS. 


The  National  Bank  Act  under  Section  5153  provides  for  the 
designation  of  National  banks  as  depositaries  for  Government 
funds,  other  than  receipts  for  customs. 

A  National  Bank  wishing  such  designation  must  make  applica- 
tion in  writing  to  the  Secretary  of  the  Treasury,  as  the  statute 
provides  that  the  designation  be  made  by  him. 

Before  making  application  a  bank  should  have  good  evidence 
that  the  Government  receipts  in  the  place  or  section  in  which  the 
bank  is  located,  justify  making  such  application,  the  Secretary 
being  governed  in  designating  depositaries  by  the  necessities  of 
the  public  service.  As  a  rule  one  depositary  is  suflScient  in  a 
district. 

As  regards  the  security  required  of  National  banks  as  depositar- 
ies, the  law  states  :  "  The  Secretary  of  the  Treasury  shall  require 
the  association  thus  designated  to  give  satisfactory  security  by  the 
deposit  of  United  States  bonds  and  otherwise."  Therefore,  with  the 
exception  that  a  portion  of  the  security  at  least  shall  be  in  Gov- 
ernment bonds,  it  is  left,  as  to  the  amount  and  kind  to  the  discre- 
tion of  the  Secretarj'-  of  the  Treasury. 

As  to  the  kind  of  security  :  the  present  requirement  is  that  it 
shall  be  United  States  bonds. 

As  to  the  amount  of  security  :  no  bank  will  be  designated  on 
less  security  than  $50,000,  and  a  larger  amount  is  required  if 
needed  for  the  protection  of  deposits. 

Section  3620  of  the  Revised  Statutes  gives  certain  discretionary  power  to 
the  Secretary  of  the  Treasury  as  to  the  deposit  of  funds  of  disbursing  officers. 
Under  this  section,  the  Secretary  may  authorize  such  deposits  to  be  made  in 
a  National  Bank  designated  as  a  depositary,  in  any  place  where  there  is  no 
sub-Treasury  ;  but  no  such  bank  is  authonzed  to  receive  such  deposits  except- 
ing as  specially  designated  for  the  purpose.  The  bank's  designation  as  a 
depositary  under  section  5153  is  not  sufficient. 
236 


237 

Section  4046  provides  for  the  deposit  of  funds  of  Postmasters  under  the 
direction  of  the  Postmaster-General  in  a  National  Bank  depositary.  It  is 
sometimes  a  convenience  for  the  Post  Office  Department  to  use  a  depositary 
for  this  purpose,  but  this  is  not  often  the  case,  as  there  is  a  general  regulation 
of  the  Department  for  Postmasters  to  deposit  with  the  central  Post  Offices  in 
their  several  sections.  For  instance  the  Post  Offices  in  the  vicinity  of  Balti- 
more transfer  their  funds  to  the  Post  Office  of  that  city. 

Section  3847  authorizes  a  Postmaster  in  any  place  where  there  is  no  Gov- 
ernment depositary  to  deposit  funds  in  any  National  Bank  at  his  own  risk  in 
his  official  capacity. 

The  following  are  the  sections  of  the  Revised  Statutes  relating 
to  this  subject ;  also  the  regulations  of  the  Secretary  of  the  Treas- 
ury governing  National  banks  as  depositaries  of  Government  funds : 

Section  5153. — Designation  of  National  Banks  as  United  States  Deposi- 
taries.— All  national  banking  associations,  designated  for  that  purpose  by 
the  Secretary  of  the  Treasury,  shall  be  depositaries  of  public  money,  except 
receipts  from  customs,  under  such  regulations  as  may  be  prescribed  by  the 
Secretary;  and  they  may  also  be  employed  as  financial  agents  of  the  Gov- 
ernment ;  and  they  shall  perform  all  such  reasonable  duties,  as  depositaries 
of  public  moneys  and  financial  agents  of  the  Government,  as  may  be 
required  of  them.  The  Secretary  of  the  Treasury  shall  require  the  associa- 
tions thus  designated  to  give  satisfactory  security,  by  the  deposit  of  United 
States  bonds  and  otherwise,  for  the  safe-keeping  and  prompt  payment  of  the 
public  money  deposited  with  them,  and  for  the  faithful  performance  of  their 
duties  as  financial  agents  of  the  Government.  And  every  association  so 
designated  as  receiver  or  depositary  of  the  public  money  shall  take  and 
receive  at  par  all  of  the  national  currency  bills  by  whatever  association 
issued,  which  have  been  paid  into  the  Government  for  internal  revenue,  or 
for  loans  or  stocks. 

Section  3620. — Concerning  Disbursing  Officers'  Deposits. — It  shall  be  the 
duty  of  every  disbursing  officer  having  any  pubhc  money  intrusted  to  him 
for  disbursement  to  deposit  the  same  with  the  Treasurer  or  some  one  of  the 
assistant  treasurers  of  the  United  States,  and  to  draw  for  the  same  only  as  it 
may  be  required  for  payments  to  be  made  by  him  in  pursuance  of  law  ;  and 
draw  from  the  same  only  in  favor  of  the  persons  to  whom  payment  is  made, 
and  all  transfers  from  the  Treasurer  of  the  United  States  to  a  disbursing 
officer  shall  be  by  draft  or  warrant  on  the  Treasurer  or  an  assistant  treasurer 
of  the  United  States.  In  places,  however,  where  there  is  no  Treasurer  or 
assistant  treasurer,  the  Secretary  of  the  Treasury  may,  when  he  deems  it 
essential  to  the  public  interest,  specially  authorize  in  writing  the  deposit  of 
such  public  money  in  any  other  public  depository,  or,  in  writing,  authorize 
the  same  to  be  kept  in  any  other  manner  and  under  such  rules  and  regula- 
tions as  he  may  deem  most  safe  and  effectual  to  faciUtate  the  payments  to 
public  creditors. 


238 

Section  4046. — Postmasters  Depositing  with  Depositaries. — Every  post- 
master, assistant,  clerk,  or  other  person  employed  in  or  connected  with  the 
business  or  operations  of  any  money-order  ofifice  who  converts  to  his  own 
use,  in  any  way  whatever,  or  loans,  or  deposits  in  any  bank,  except  as 
authorized  by  this  title,  or  exchanges  for  other  funds,  any  portion  of  the 
money-order  funds,  shall  be  deemed  guilty  of  embezzlement,  and  any  such 
person,  as  well  as  every  other  person  advising  or  participating  therein,  shall, 
for  every  such  offense,  be  imprisoned  for  not  less  than  six  months  nor  more 
than  ten  years,  and  be  fined  in  a  sum  equal  to  the  amount  embezzled ;  and 
any  failure  to  pay  over  or  produce  any  money-order  funds  intrusted  to  such 
person  shall  be  taken  to  be  prima  facie  evidence  of  embezzlement;  and  upon 
the  trial  of  any  indictment  against  any  person  for  such  embezzlement  it  shall 
be  prima  facie  evidence  of  a  balance  against  him  to  produce  a  transcript 
from  the  money-order  account  books  of  the  Sixth  Auditor.  But  nothing 
herein  contained  shall  be  construed  to  prohibit  any  postmaster  depositing, 
under  the  direction  of  the  Postmaster-General,  in  a  national  bank  designated 
by  the  Secretary  of  the  Treasury  for  that  purpose,  to  his  own  credit  as  post- 
master, any  money-order  or  other  funds  in  his  charge,  nor  prevent  his  nego- 
tiating drafts  or  other  evidences  of  debt  through  such  bank,  or  through 
United  States  disbursing  officer,  or  otherwise,  when  instructed  or  required  to 
do  so  by  the  Postmaster-General  for  the  purpose  of  remitting  surplus  money- 
order  funds  from  one  post  office  to  another  to  be  used  in  payment  of  money- 
orders.  Disbursing  officers  of  the  United  States  shall  issue,  under  regula- 
tions to  be  prescribed  by  the  Secretary  of  the  Treasury,  duplicates  of  lost 
checks  drawn  by  them  in  favor  of  any  postmaster  on  account  of  money-order 
or  other  public  funds  received  by  them  from  some  other  postmaster.* 

Section  3847. — Postmasters'  Deposits,  IVJiere  no  Depositary. — Any  post- 
master, having  pubhc  money  belonging  to  the  Government,  at  an  office 
within  a  county  where  there  are  no  designated  depositaries,  treasurers  of 
mints,  or  Treasurer  or  assistant  treasurers  of  the  United  States,  may  deposit 
the  same,  at  his  own  risk  and  in  his  official  capacity,  in  any  National  bank  in 
the  town,  city,  or  county  where  the  said  postmaster  resides ;  but  no  authority 
or  permission  is  or  shall  be  given  for  the  demand  or  receipt  by  the  postmas- 
ter, or  any  other  person,  of  interest,  directly  or  indirectly,  on  any  deposit 
made  as  herein  described;  and  every  postmaster  who  makes  any  such 
deposits  shall  report  quarterly  to  the  Postmaster-General  the  name  of  the 
bank  where  such  deposits  have  been  made,  and  also  state  the  amount  which 
may  stand  at  the  time  to  his  credit. 

Section  5488. — Penalty  for  Unauthorized  Deposit  of  Public  Money.— 
Every  disbursing  officer  of  the  United  States  who  deposits  any  public  money 
intrusted  to  him  in  any  place  or  in  any  manner,  except  as  authorized  by  law, 
or  converts  to  his  own  use  in  any  way  whatever,  or  loans  with  or  without 

*  The  Post  Office  Department  has  had  occasion  in  only  three  or  four 
instances  to  use  National  Bank  depositaries  for  post  office  deposits,  the 
post  offices  in  central  localities  receiving  the  deposits  of  the  smaller  offices. 


239 

interest,  or  for  any  purpose  not  prescribed  by  law  withdraws  from  the  Treas- 
urer or  any  assistant  treasurer,  or  any  authorized  depository,  or  for  any  pur- 
pose not  prescribed  by  law  transfers  or  applies  any  portion  of  the  public 
money  intrusted  to  him,  is,  in  every  such  act,  deemed  guilty  of  an  embezzle- 
ment of  the  money  so  deposited,  converted,  loaned,  withdrawn,  transferred, 
or  apphed ;  and  shall  be  punished  by  imprisonment  with  hard  labor  for  a 
term  not  less  than  one  year  nor  more  than  ten  years,  or  by  a  fine  of  not  more 
than  the  amount  embezzled  or  less  than  one  thousand  dollars,  or  by  both 
such  fine  and  imprisonment. 

Section  5497. — Pe7ialty  for  Unauthorized  Receiptor  Use  of  Public  Money . — 
Every  banker,  broker,  or  other  person  not  an  authorized  depositary  of  public 
moneys,  who  knowingly  receives  from  any  disbursing  officer,  or  collector  of 
internal  revenue,  or  other  agent  of  the  United  States,  any  public  money  on 
deposit,  or  by  way  of  loan  or  accommodation,  with  or  without  interest,  or 
otherwise  than  in  payment  of  a  debt  against  the  United  States,  or  who  uses, 
transfers,  converts,  appropriates,  or  applies  any  portion  of  the  public  money 
for  any  purpose  not  prescribed  by  law,  and  every  president,  cashier,  teller, 
director,  or  other  officer  of  any  bank  or  banking  association,  who  violates 
any  of  the  provisions  of  this  section,  is  guilty  of  an  act  of  embezzlement  of 
the  pubhc  money  so  deposited,  loaned,  transferred,  used,  converted,  appro- 
priated, or  applied,  and  shall  be  punished  as  prescribed  in  section  fifty-four 
hundred  and  eighty-eight. 


Regulations  for  the  Deposit  of  Public-  Moneys. 

Department  Circular  No.  90,  Division  of  Public  Moneys. 

The  following  regulations,  based  upon  specific  provisions  of 
existing  laws,  for  the  violation  of  which  penalties  of  a  severe 
character  are  provided,  are  hereby  prescribed,  and  a  strict  com- 
pliance therewith  enjoined : 

Collections. — Collectors  and  surveyors  of  customs,  collectors  of  internal 
revenue,  and  receivers  of  public  moneys,  Uving  in  the  same  city  or  town  with 
the  U.  S.  Treasurer  or  an  ass't  t'r,  or  a  national  bank  depositary,  must 
deposit  their  receipts  at  the  close  of  each  day.  Officers  at  such  a  distance 
from  a  depositary  that  daily  deposits  are  impracticable  must  forward  their 
receipts  as  often  as  they  amount  to  $i,ooo,  and  at  the  end  of  each  month 
without  regard  to  the  amount  then  accumulated. 

•  All  collections  must  be  deposited  to  the  credit  of  the  Treasurer  of  the  U.  S., 
except  moneys  received  by  collectors  of  internal  revenue  from  sales  under 
section  3460,  Revised  Statutes,  or  from  offers  of  compromise  when  received 
prior  to  the  acceptance  of  the  offer,  which  must  be  deposited  to  the  credit  of 
the  Secretary  of  the  Treasury. 

District  attorneys,  marshals,  and  clerks  of  courts,  who  receive  public 
moneys  accruing  to  the  United  States  from  fines,  penalties  and  forfeitures, 


240 

fees,  costs  (including  costs  in  civil  and  criminal  suits  for  violation  of  the  postai 
laws),  forfeitures  of  recognizances,  debts  due  the  United  States,  interest  on 
such  debts,  sales  of  public  property,  or  from  any  other  sources,  except  as 
stated  below,  will  deposit  the  same  in  accordance  with  the  foregoing  para- 
graphs. Moneys  accruing  from  customs  (including  navigation)  should  be 
paid  to  the  collector  or  surveyor  of  customs  of  the  district  in  which  the 
case  arose,  a  receipt  accepted  therefor  to  be  sent  to  the  Solicitor  of  the 
Treasury.  Moneys  accruing  from  internal  revenue  cases  should  be  paid  to 
the  collector  of  internal  revenue  of  the  district  in  which  the  case  arose, 
a  receipt  accepted  therefor  to  be  sent  to  the  Commissioner  of  Internal 
Revenue.  Moneys  accruing  from  civil  post  office  suits  and  fines  in  criminal 
cases  for  violation  of  the  postal  laws  should  be  deposited  to  the  credit  of  the 
Treasurer  of  the  United  States  for  the  use  of  the  Post  Office  Department. 

The  department  encourages  the  practice  of  a  deputy  collector  depositing 
directly  with  a  depositary  in  the  name  of  his  principal,  believing  that  greater 
economy  and  dispatch  will  thereby  be  attained.  In  such  cases  the  deputy 
will  see  that  certificates  are  issued  in  the  name  of  the  collector  for  whom  he 
is  acting,  to  whom  he  should  forward  the  portion  of  the  set  received  by  him 
from  the  depositary. 

Disbursing  officers  or  agents  must  deposit  disbursing  funds  to  their  official 
credit  and  draw  upon  such  funds  in  their  official  capacity  only.  Unless 
otherwise  directed,  they  must  deposit  such  moneys  with  the  Treasurer  or  an 
assistant  treasurer  of  the  United  States,  or  a  National  bank  depositary  if 
specially  authorized  by  the  Secretary  of  the  Treasury  for  that  purpose  under 
the  provisions  of  section  3620,  Revised  Statutes  of  the  United  States.  In  case 
no  such  special  authority  has  been  given  to  a  convenient  depositary,  applica- 
tion should  be  made  to  the  Secretary  of  the  Treasury  for  such  authorization. 

Reference  is  hereby  made  to  Department's  Circulars  of  March  12,  1889, 
relative  to  the  transportation  of  public  moneys  by  express;  August  24,  1876, 
relative  to  disbursing  funds,  November  28,  1879,  and  June  2,  1882,  relative 
to  offers  of  compromise,  and  June  11,  1896,  concerning  the  issuance  and  dis- 
position of  certificates  of  deposit ;  also,  to  Act  of  Congress  of  January  22, 
1894,  sections  3216,  3218,  3617,  3620,  3621,  (as  amended  by  Act  of  May  28, 
1896,)  3625,  and  5481  to  5505,  inclusive,  of  the  Revised  Statutes  of  the  United 
States. 

This  circular  supersedes  circular  regulations  for  the  deposits  of  public 
moneys,  dated  January  12,  1888. 

Disposition  to  be  Made  of  Certificates  of  Deposit. 

Department  Circular  No.  89,  Division  of  Public  Moneys. 

Section  3621,  Revised  Statutes  of  the  United  States,  as  amended  by  sec- 
tion 5  of  the  Legislative,  Executive,  and  Judicial  Appropriation  Act,  approved 
May  28,  1896,  requires  tliat  the  Treasurer  and  assistant  treasurers  of  the 
United  States  and  all  National  bank  depositaries  shall  transmit  forthwith  to 


241 

the  Secretary  of  the  Treasury  the  original   of  every  certificate  of  deposit 
issued  by  them  and  dehver  to  the  depositor  the  remainder  of  the  set. 

Accordingly  the  instructions  on  this  subject  contained  in  Department  Cir- 
cular No.  i8,  dated  February  2,  1894,  are  hereby  revoked  and  the  following 
regulations  are  hereby  prescribed,  to  take  effect  July  i,  1896, 

The  originals  of  all  certificates  issued  for  the  deposit  of  any  and  all  public 
moneys  of  every  character  and  description,  except  as  stated  in  the  next  suc- 
ceeding paragraph,  must  be  forwarded  immediately  upon  their  issuance  to 
the  Secretary  of  the  Treasury  by  the  depositaries,  who,  before  transmitting 
them,  should  see  that  their  amounts  correspond  with  the  amounts  actually 
deposited  with  them. 

Exceptions. — Those  issued  by  an  assistant  treasurer  for  the  shipment  of 
silver  coin,  in  duplicate,  the  original  to  be  transmitted  by  him  to  the  office 
from  which  the  coin  is  to  be  shipped,  and  the  duplicate  to  the  depositor; 
those  issued  by  a  Nat'l  B'k  depositary  for  shipment  of  silver  coin,  in  dupli- 
cate, the  original  to  be  transmitted  by  the  depositary  to  the  Treasurer  of  the 
United  States  and  the  duplicate  to  the  depositor ;  those  issued  for  five  per 
cent,  redemption  fund  and  for  the  transfer  of  funds  from  one  depositary  to 
another,  in  duplicate,  the  original  to  be  transmitted  by  the  depositary  to  the 
Treasurer  of  the  United  States  and  the  duplicate  to  the  depositor:  and  those 
issued  for  the  deposit  of  moneys  pertaining  to  the  Post  Ofifice  Department, 
in  duplicate,  the  original  to  be  transmitted  by  the  depositary  to  the  Auditor 
for  the  Post  Ofifice  Department  and  the  duplicate  to  the  depositor. 

Certificates  of  deposits  should  be  issued  and  disposed  of  as  hereinafter 
provided,  and  in  no  case  should  a  second  or  duplicate  set  of  certificates  be 
issued  for  any  deposit,  except  upon  special  authority  from  the  Secretary  of 
the  Treasury,  viz. : 

Customs  Certificates  in  name  of  customs  officers  where  naval  officers 
are  located,  duties  on  imports,  etc.,  including  repayments  of  disbursing 
funds,  in  triplicate ;  those  issued  in  the  name  of  customs  officers  at  other 
ports,  in  duplicate ;  the  originals  of  the  former  class  to  be  transmitted  by 
the  depositary  to  the  Secretary  of  the  Treasury,  the  duplicates  to  the  naval 
officers  and  the  triplicates  to  the  depositors ;  and  of  the  latter  class,  the  origi- 
nals to  the  Secretary  of  the  Treasury  and  the  duplicates  to  the  depositors. 
(This  section  does  not  concern  National  Bank  Depositaries.) 

Internal  Revenue  Certificates  in  name  of  collectors  of  internal  revenue  for 
internal-revenue,  internal-revenue  stamps,  or  repayments  of  disbursing  funds, 
in  triplicate  ;  the  original  to  be  transmitted  by  the  depositary  to  the  Secretary' 
of  the  Treasury  and  the  remainder  of  the  set  to  the  depositor  who  should 
forward  the  duplicate  to  the  Commissioner  of  Internal  Revenue  and  retain 
the  triplicate. 

Sales  of  Public  Lands,  etc. — Those  issued  in  the  name  of  receivers  of 
public  moneys  for  sales  of  public  lands,  etc.,  including  repayments  of  dis- 
bursing funds,  z«  triplicate;  the  original  to  the  Sec'y  of  the  Treasury  and 
the  remainder  of  the  set  to  the  depositor,  who  should  forward  the  duphcate 
to  the  Commissioner  of  the  General  Land  Office  and  retain  the  triphcate. 
16 


242 

Judiciary. — Those  issued  in  the  name  of  judicial  officers,  district  attor- 
neys, marshals,  clerk  of  court,  etc.,  in  duplicate ;  the  original  to  the  Secretary 
and  the  duplicate  to  the  depositor. 

Army  and  Navy. — Those  issued  in  the  name  of  military  or  naval  officers, 
on  account  of  repayments,  sales  of  public  property,  or  otherwise,  in  duplicate ; 
the  original  to  the  Secretary  and  the  duplicate  to  the  depositor. 

Surveys  of  Public  Lands. — Those  issued  on  account  of  surveys  of  public 
lands,  in  triplicate;  the  original  to  the  Secretary,  and  the  remainder  of  the 
set  to  the  depositor,  who  should  forward  the  duplicate  to  the  Surveyor-Gen- 
eral and  retain  the  triplicate. 

Patent  Fees. — Those  issued  on  account  of  patent  fees,  in  triplicate ;  the 
original  to  the  Secretary,  and  the  remainder  of  the  set  to  the  depositor,  who 
should  forward  the  duplicate  to  the  Commissioner  of  Patents  and  retain  the 
triplicate. 

Semi-Annual  Duty. — Those  issued  on  account  of  semi-annual  duty,  in  tri- 
plicate ;  the  original  to  the  Secretary,  and  the  remainder  of  the  set  to  the 
depositor,  who  should  forward  the  duplicate  to  the  Treasurer  of  the  U.  S.  and 
retain  the  triplicate. 

Missing  Coupons. — Those  issued  on  account  of  coupons  missing  from 
bonds  forwarded  for  redemption,  or  otherwise,  in  duplicate  ;  both  the  original 
and  duplicate  to  be  transmitted  by  the  depositary  to  the  Secretary  of  the 
Treasury. 

Miscellaneous  Receipts. — Those  issued  on  account  of  subscriptions  to  any 
loan,  repayments  of  interest  on  public  debt,  civil  repayments,  except  as 
hereinbefore  otherwise  provided  for,  consular  fees,  miscellaneous  and  other 
receipts,  in  duplicate  ;  the  original  to  be  transmitted  to  the  Secretary  of  the 
Treasury  and  the  duplicate  to  the  depositor. 

Special  Accounts,  Secretary  of  the  Treasury. — Those  issued  for  deposits 
to  his  credit  in  special  accounts  Nos.  I  and  5,  in  triplicate ;  the  originals  to 
be  transmitted  by  the  depositary  to  the  Secretary,  and  the  remainder  of 
the  set  to  the  depositor ;  those  issued  to  the  credit  of  the  Secretary  of  the 
Treasury,  special  account  No.  3,  in  duplicate,  the  original  to  be  transmitted 
by  the  depositary  to  the  Secretary  and  the  duplicate  to  the  depositor. 

The  depositor  should  forward  the  duplicate  pertaining  to  account  No.  i  to 
the  Commissioner  of  Internal  Revenue  and  retain  the  triplicate ;  he  should 
forward  the  duplicate  pertaining  to  account  No.  5  to  the  Solicitor  of  the 
Treasury  and  retain  the  triplicate ;  he  should  retain  the  duplicate  pertaining 
to  account  No.  3. 

Disbursing  Officers'  Receipts. — For  each  deposit  made  to  the  official  credit 
of  a  disbursing  officer  a  single  receipt  should  be  issued  and  delivered  to  the 
depositor. 

GENERAL    REMARKS. 

In  no  case  are  certificates  of  deposit  required  to  be  filed  with  accounts 
rendered  by  Government  officers  to  the  accounting  officer  of  the  Treasury 
Department,  nor  does  such  a  disposition  of  any  certificates  of  deposit  secure 


243 

to  the  officers  transmitting  them  proper  credits  in  their  accounts.  Credit  for 
deposits  is  given  officers  in  the  settlement  of  their  accounts  only  upon  war- 
rants issued  by  the  Secretary  of  the  Treasury,  based  upon  the  report  of  the 
depositary  and  verified  by  the  original  certificate  of  deposit.  In  taking  credit 
in  their  accounts  current,  however,  for  money  deposited,  officers  should  state 
specifically  the  date  of  deposit,  with  whom  deposited,  and  the  source  from 
which  the  money  was  derived. 

All  original  certificates  issued  for  deposits  by  military,  naval,  and  other 
officers,  the  amounts  of  which  are  required  to  be  recorded  in  any  of  the 
bureaus  of  the  War,  Navy,  Interior,  or  other  Executive  Departments,  will, 
immediately  upon  their  receipt  by  the  Secretary  of  the  Treasury,  be  com- 
pared with  the  proper  depositary  account,  recorded,  and  forwarded  to  the 
head  of  the  Department  to  which  the  deposits  pertain  for  designation  of  the 
proper  appropriations,  etc. 


PART    THIRD. 


CHAPTER   I. 


REPORTS  TO  THE  COMPTROLLER  OF  THE  CURRENCY. 

[The  Comptroller  of  the  Currency  requires  that  National  banks  use  cnly 
the  printed  forms  furnished  by  his  office.  Written  forms  sent  by  the  banks 
will  not  be  accepted.] 

REPORT  OF  CONDITION. 

(For  form  containing  items  explained  in  the  text,  see  pages  249-252.) 

RESOURCES. 

Loans  and  Discounts. — These  should  embrace  paper  of  all  kinds  repre- 
senting money  loaned  by  the  bank.  A  schedule  of  the  various  classes  of 
paper  composing  the  total,  should  be  made  in  the  form  for  same,  on  the  back 
of  the  report ;  and  in  making  up  this  schedule  especial  care  should  be  taken 
to  give  a  description  of  properties  covered  in  loans  "  on  mortgages  and  other 
real  estate  security,"  if  any  such  occur,  and  to  furnish  full  information  as  to 
the  following : 

"  Bad  debts,  as  defined  in  section  5204,  R.  S." 

"  Other  suspended  and  overdue  paper.'' 

"  Liabilities  of  directors  (individual  or  firm)  as  payers," 

Overdrafts. — Enter  the  total  of  balances  of  all  depositors'  accounts  which 
are  overdrawn.  These  should  be  carefully  classified  in  the  proper  schedule 
on  the  back  of  report.  While  overdrafts  are  unavoidable  under  certain  local 
condidons  of  business,  they  should,  as  a  rule,  not  be  allowed.  When  such 
accommodation  to  a  responsible  customer  is  called  for,  a  demand  note  should 
be  taken  for  the  loan,  the  customer  credited,  and  bills  receivable  charged.  If 
a  certain  maximum  temporary  credit  is  wanted  to  draw  against,  let  a  demand 
note  be  given  the  bank,  the  amount  passed  to  the  customer's  credit,  and  in 
the  settlement  the  customer  charged  interest  for  the  amount  checked  out : 

United  States  Bonds  to  SecJtre  Circulation  (  par  Talue). 

United  States  Bonds  to  Sea/re  Deposits  {par  value). 

United  States  Bonds  on  Hand  {par  -,'alue). 
244 


245 

Enter  these  at  their  par  value,  taking  care  to  indicate  by  the  interest  rate 
the  class  in  each  case.  If  more  than  one  kind  is  held  for  any  one  of  the 
purposes  named,  state  the  amount  and  class  of  each  kind  separately. 

Premium  on  Bonds  for  Circulation — Premium  on  Other  U.  S.  Bonds. — En- 
ter the  premium  on  U.  S.  bonds  only  at  the  actual  market  value  of  same,  taking 
care  to  state  the  premium  on  bonds  held  "for  circulation  ''  separately  from 
that  on  "other  U.  S.  bonds."  Premium  on  bonds  of  any  other  kind,  on 
stocks,  etc.,  must  not  be  entered  here,  but  included  in  item  of  "  stocks,  secu- 
rities, etc.'' 

Stocks,  Securities,  Judgments,  Claims,  etc. — This  should  embrace  secu- 
rities of  all  kinds  (other  than  U.  S.  bonds)  which  are  owned  by  the  bank, 
vft.,  bonds,  stocks,  chattel  mortgages,  judgments,  claims,  etc.  Securities 
held  as  collateral  for  loans  must  not  be  entered  here.  Any  real  estate  secu- 
rities owned  by  the  bank  must  be  entered  with  "  other  real  estate."  These 
securities,  etc.,  should  be  entered  in  the  report  at  the  values  at  which  they 
stand  on  the  books  of  the  bank,  and  the  "  book  "  value  should  always  repre- 
sent the  actual  "  market''  value,  as  nearly  as  possible.  All  the  items  com- 
posing the  total  should  be  listed  in  the  proper  schedule  on  back  of  the  report. 

Banking  House. — Enter  at  its  market  value,  as  nearly  as  possible,  only 
such  real  estate  held  by  the  bank  under  Section  5137,  "  necessary  for  its  im- 
mediate accommodation  in  the  transaction  of  its  business,"  and  no  other. 

Furniture  and  Fixtures. — Enter  at  their  actual  value  to  the  bank  all  fur- 
niture and  fixtures  used  in  the  conduct  of  its  business. 

Other  Real  Estate  and  Mortgages  Owned. — Give  the  market  value  of  all 
real  estate  (except  the  banking-house  property)  owned  by  the  bank  and  held 
by  virtue  of  any  deed,  mortgage,  vendor's  lien,  or  other  instrument  in  writ- 
ing. Any  real  estate  securities  not  owned  by  the  bank,  but  held  by  it  as  col- 
lateral for  loans,  should  not  be  included  here,  but  in  "loans  and  discounts," 
and  scheduled  in  the  proper  place  on  back  of  the  report.  All  transactions  in 
real  estate  should  be  made  in  strict  conformity  with  the  provisions  of  Section 
5137,  which  clearly  defines  the  purposes  for  which  banks  "  may  purchase, 
hold,  and  convey"  real  estate,  the  evident  intent  of  the  restrictions  there 
imposed  was  to  prevent  banks  from  investing  their  resources  in  a  form  which 
was  not  readily  convertible. 

Due  from  National  Banks — Not  Approved  Agents. — Enter  the  total  of 
balances  <\\x&  from  such  National  banks  as  are  not  "  approved  reserve  agents." 

Due  from  State  and  Private  Banks  and  Bankers. — Enter  the  total  of  bal- 
ances due  from  such  banks  and  bankers,  as  distinguished  from  National 
banks.  It  has  always  been  held  by  the  Comptroller's  office  that,  as  these  in- 
stitutions are  either  corporations,  firms,  or  individuals,  any  balance  held  by 
them  in  excess  of  one-tenth  of  the  capital  stock  of  the  bank  must  be  regarded 
as  an  excessive  loan  made  in  violation  of  Section  5200.  All  such  excessive 
balances  should,  therefore,  be  entered  in  schedule  for  "  loans  exceeding  the 
limit  prescribed  by  Section  5200,"  etc.,  on  the  back  of  the  report. 

Due  from  Approved  Reserve  Agents. — Enter  the  total  of  balances  due 
/ro?H  such  National  banks  as  have  been   approved  as  "  reserve  agents  "  by 


246 

the  Comptroller  and  balances  due  from  such  banks  only.  Take  care  to  enter 
in  the  proper  schedule  on  the  back  of  report  the  name  of  each  such  "  reserve 
agent,"  the  locatio7i  of  same,  and  the  balance  due  from  it.  If  reciprocal  ac- 
counts are  kept  with  "  reserve  agent  "  banks,  only  the  net  balances  due  from 
such  banks  (if  any)  should  be  included  under  this  item. 

Checks  and  Other  Cash  Items. — This  should  include  only  such  items  as 
are  readily  convertible  into  cash,  and  no  others.  Items  of  expenses  and  taxes 
paid,  dishonored  drafts  and  checks,  overdrafts,  and  similar  items  should  be 
charged  to  appropriate  accounts.  Be  careful  to  schedule  items  on  back  of 
report,  properly  classified,  and  see  that  the  statements  in  schedule  of  these 
items  on  back  of  report  and  of  all  schedules  agree  with  face  of  the  report. 

Exchanges  for  Clearing-House. — These  are  checks  or  drafts  on  banks 
which  are  members  of  a  clearing-house,  and  will  occur  only  in  the  case  of  a 
bank  located  in  a  place  where  there  is  a  clearing-house. 

Bills  of  Other  Banks. — Enter  circulating  notes  issued  by  other  National 
banks,  and  these  only.  If  a  bank  has  any  notes  of  its  own  issue  on  hand, 
they  must  be  entered  under  "Notes  received  from  Comptroller''  in  "lia- 
bilities." 

Fractional  Paper  Currency,  Nickels  and  Cents. — Silver  fractional  currency 
must  7iot  be  included  here,  but  under  "  specie." 

Specie. — Enter  only  coin  (but  not  nickels,  or  cents)  and  certificates  repre- 
senting coin,  taking  care  to  state  the  amount  of  each  kind  in  its  proper  place 
in  schedule.  In  order  that  this  may  be  accurately  done  at  any  time,  every 
bank  should  keep  a  daily  record  of  such  items  in  this  form. 

Legal-Tender  Notes. — Enter  only  U.  S.  Treasury  "legal-tender"  notes, 
taking  care  not  to  include  any  "  National-bank  ''  notes. 

U.  S.  Certificates  uf  Deposit  for  Legal  Tender  Notes  (Section  5193,  R.  S). 
— These  are  certificates  issued  by  theU.  S.  Treasury  for  "  legal-tender  "  notes 
deposited  there,  under  the  provisions  of  Section  5193,  by  National  banks,  and 
may  be  in  multijiles  of  $5,000. 

Redemption  Fund  with  U.  S.  Treasurer  (not  more  than  5  per  cent,  on 
circulation). — Enter  the  actual  amount  on  deposit  with  the  Treasurer  of  the 
U.  S.  for  the  redemption  of  circulation  issued  by  the  bank  for  which  it  is  ^ill 
liable. 

Due  from  U,  S.  Treasurer  (other  than  5  per  cent,  redemption  fund). — This 
is  intended  to  include  any  amounts  due  to  the  bank  from  the  U.  S.  Treasurer 
(other  than  5  per  cent,  fund),  such  as  notes  of  other  National  banks  or  other 
forms  of  currency  or  bonds  forwarded  to  him  for  redemption. 

LIABILITIES. 

Capital  Stock  Paid  In. — Enter  only  "capital  stock  paid  in  "  for  which  a 
certificate  has  been  received  from  the  Comptroller.  "  Capital  stock  paid  in  " 
for  which  no  certificate  has  been  received  by  the  bank  at  date  of  call  for 
report  must  not  be  included  here,  but  entered  in  the  line  below  as  stock  "  not 
certified  to.'' 


247 

Surplus  Fund. — This  should  show  whatever  amount  has  been  placed  to  the 
credit  of  this  fund  in  accordance  with  the  requirements  of  Section  5199. 

Undivided  Profits. — This  should  represent  such  profits  as  have  not  been 
applied  to  the  payment  of  expenses,  losses,  increase  of  surplus  fund  (where 
still  necessary),  or  of  dividends.  Profits  from  all  sources  should  be  collected 
under  this  head. 

Current  Expenses  and  Taxes  Paid. — This  should  embrace  all  items  of  ex- 
penses and  taxes  paid,  but  not  charged  off  to  "  undivided  profits,"  and  the 
total  deducted  from  that  item  to  give  net  undivided  profits. 

Circulating  Notes  Received  from  Comptroller. — Enter  the  total  of  circula- 
tion outstandingyi^r  which  the  ba7ik  is  still  liable.  A  bank  is  no  longer  hable 
for  circulating  notes  for  the  redemption  of  which  it  has  deposited  lawful 
money  with  the  U.  S.  Treasurer.  Should  it  have  any  of  its  own  notes  *'  on 
hand'' or  "in  Treasury  for  redemption  or  in  transit,"  they  should  be  de- 
ducted here  from  the  total  circulation  received. 

State  Bank  Circulation  Outstanding. — This  will  apply  only  in  the  case  of 
State  banks  converted  to  National  banks,  and  refers  to  circulating  notes 
issued  by  such  banks  prior  to  their  conversion. 

Dividends  Unpaid. — Enter  the  total  of  dividends,  if  any,  to  credit  of  share- 
holders on  books  of  the  bank  not  yet  called  for  by  them. 

Individual  Deposits  Subject  to  Check — Demand  Certificates  of  Deposit — 
Time  Certificates  of  Deposit — Certified  Checks — Cashier's  Checks  Outstand- 
ing.— These  embrace  all  classes  of  deposits  (other  than  those  of  the  U.  S.  or 
its  disbursing  officers).  They  should  be  carefully  classified,  according  to  char- 
acter. If  certificates  of  deposit  have  been  issued  for  "  money  borrowed  "  by 
the  bank,  they  should  not  be  entered  here,  but  in  the  item  of  "  bills  payable."' 
"  Overdrafts,"  if  any,  should  not  be  deducted  from  the  total  amount  at  credit 
of  deposits,  but  should  be  stated  separately  under  item  of  "overdrafts." 

U.  S.  Deposits. — Enter  the  total  of  deposits  made  by  the  U.  S.  Government 
other  than  those  made  by  its  disbursing  officers. 

Deposits  of  U.  S.  Disbursing  Officers. — Enter  only  such  deposits  of  Gov- 
ernment funds  as  are  subject  to  check  by  its  disbursing  officers. 

Due  to  Approved  Reserve  Agents. 

Due  to  Other  National  Banks. — Enter  the  total  of  all  balances  due  to 
other  National  banks.  Any  amount  which  represents  money  borrowed  for 
a  stated  period  of  time  from  another  bank  should  be  entered  below  in  item 
of  "bills  payable." 

Due  to  State  and  Private  Banks  and  Bankers. — This  should  embrace  all 
balances  due  to  such  banks  and  bankers.  Remarks  as  to  "  money  bor- 
rowed "  made  in  preceding  paragraph  are  applicable  here  also. 

Notes  and  Bills  Rediscounted. — This  should  include  any  portion  of  the 
"  loans  and  discounts"  which  has  been  rediscounted  by  the  bank  for  which 
it  may  be  in  any  way  liable,  by  indorsement  or  otherwise.  While  circum- 
stances render  rediscounts  necessary  at  times,  the  resources  of  the  bank 


248 

should  not  be  too  largely  used  in  this  way,  ana  only  for  short  periods  of  time, 
to  supply  temporary  demands  of  good  customers. 

Bills  Payable. — Enter  the  total  amount  of  "  money  borrowed  "  by  the  bank, 
which  is  represented  either  by  its  note,  certificate  of  deposit,  or  other  instru- 
ment issued  by  it,  or  by  any  credit  given  it  by  any  bank  or  banker  which  is 
intended  as  a  loan  to  it  for  any  stated  period  of  time.  Money  borrowed  by 
means  of  "  rediscounts  ''  or  "  bills  payable  "  (as  defined  in  this  paragraph)  if 
it  exceeds  the  amount  of  the  capital  stock,  is  in  violation  of  section  5202. 

Other  Liabilities  (Miscellaneous). — This  total  is  intended  to  represent 
small  items.     If  it  includes  any  large  items,  specify  what  they  are. 

Average  Reserve  and  Interest. — See  that  the  "average  reserve"  for  the 
thirty  days  preceding  the  date  of  the  call  is  entered  in  the  proper  place  on 
back  of  the  report,  as  also  "the  highest  rate  of  interest  paid  by  the  bank  " 
on  any  money  deposited  with  or  borrowed  by  it. 

Suggestions. — Before  the  report  is  signed,  see  that  the  footings  of  "lia- 
bilities "  and  "resources"  balance;  and  that  the  items  on  each  side  are 
in  their  proper  places  ;  all  schedules  on  back  of  the  report  properly  filled  out ; 
and  that  the  total  of  items  in  each  schedule  agrees  with  item  in  the  face  of 
the  report.  Where  there  are  no  items  to  be  entered  in  any  schedule  on  the 
back  of  report,  write  the  word  "  none,"  as  items  are  frequently  omitted 
through  inadvertence,  and  correspondence  is  made  necessary  thereby.  Give 
number  and  name  of  bank  on  each  loose  schedule  of  report.  An  exact  copy 
of  the  report  should  always  be  retained  by  the  bank. 

Oath  and  Attestation. — The  report  must  be  sworn  to  by  the  president  or 
cashier  (not  the  assistant' cashier  ),a«^  no  other  officer  of  the  bank  is  qualified 
to  do  this.  The  attestation  must  be  by  three  directors,  and  the  officer  sign- 
ing the  report  must  not  attest  to  its  correctness  as  a  director,  and  his  oath 
must  be  acknowledged  before  an  officer  having  an  official  seal,  and  not  an 
officer  of  the  bank.     See  Sec.  521 1  and  act  February  26,  1881. 

Publication  of  Reports. — Reports  must  be  published  in  a  newspaper  of  the 
place,  or,  if  it  has  none,  in  one  in  the  nearest  place  in  the  same  county, 
and  proof  furnished  of  publication  to  the  Comptroller.  (See  Section  521 1.) 
The  Comptroller  furnishes  a  convenient  form  for  printer's  "  copy."  The 
report  must  not  be  condensed  for  pubHcation,  but  conform  fully  to  report  sent 
the  Comptroller,  excepting  the  schedules  on  back. 

The  form  of  affidavit  required  for  proof  is  furnished  to  the  banks  when 
reports  ;ire  called  for,  and  the  instructions  therewith  must  be  strictly  complied 
with. 


249 


No.  of  Bank, 


Form  of  Report  Required  by 


Dr. 


Report  of  the  condition  of  "  The 


-,"  at ,  in  the  State 


2. 

3- 


5- 
6. 


8. 

9- 

lo. 

II. 

12. 

14. 

15- 
16. 

17- 


18. 


19. 


Resources. 


Loans  and  discounts  on  which  officers  and  direct- 
ors are  liable  (see  schedule) $ 

Loans  and  discounts  on  which  oflScers  and  directors 
are  not  liable $ 

Overdrafts,  secured,  $ .unsecured,  | ,  (see  schedule) 

United  States  bonds  lu  secure  circulation  (par  value), 

percenLs, percents. 


Dollars    CmIs 


United  Slates  bonds  to  secure  United  States  deposits  (par 
value), percents 

United  States  bonds  on  hand  (par  value), percents  .    . 

Premium  on  bonds   for  circulation,  $ ;    premium  on 

other  United  States  bonds,  $ 


Stocks,  securities,  etc.,  including  premium  on  same  (see 

Schedule) 

Banking  house  $ ;  furniture  and  fixtures  $ 


Other  real  estate  and  mortgages  owned  (see  schedule)  . 

Due  from  National  banks  (not  approved  reserve  agents) 

Due  from  State  and  private  banks  and  bankers 

Due  from  approved  reserve  agents  ( see  schedule)    .    .    . 

Checks  and  other  cash  items  (see  schedule) 

Exchanges  for  Clearing-house 

Bills  of  other  National  banks 

P>actional  paper  currency,  nickels,  and  cents 

Lawful  money  reserve  in  bank,  viz. : 

Gold  coin $  ■ 

Gold  Treasury  certificates     .   .    .   $  . 
Gold  clearing-house  certificates  .   $  . 

Silver  dollars $  ■ 

Silver  Treasury  certificates   .    .    .   $ 
Fractional  silver  coin $  ■ 


Specie,  viz. 


Total  Specie $ 

Legal-tender  notes $ 

United  States  certificates  of  deposit  (see  section 

5193,  Revised  statutes) $ 


Redemption  finid  with  United  States  Treasurer  (not  more 

than  5  per  cent,  on  circulation) 

Due  from  United  States  Treasurer 


Total 


I, 


of  "  The 


do  solemnly  swear  that  the  above  state- 


ment is  true,  and  that  the  schedules  on  back  of  the  report  fully  and  correctly 

represent  the  true  state  of  the  several  matters  therein  contained,  to  the  best 

of  my  knowledge  and  belief.  >  Cashier. 

Correct.    Attest :  , ) 

_  _  ,  >■  Directors. 

[SEAI..]  j 

State  of ,  County  of- 


Sworn  to  and  subscribed  before  me  this 


day  of  • 


189- 


250 


the  Comptroller  of  the  Currency. 


of- 


-,  at  the  close  of  business  on  the 


day  of- 


-.  jSg-. 


Cr. 


4- 


5- 
6. 

7. 
8. 

9. 
10. 
II. 
12. 

13- 
14. 

16. 

17- 
18. 

19- 


Liabilities. 


1.  Capital  stock  paid  in 

2.  Surplus  fund 

3.  Undivided  profits 

Less  current  expenses  and  taxes  paid 


I 

% 


Dollars. 


Circulating  notes  received  from  Comptroller  .  .  . 
Less  amount  on  hand  and  in  Treasury  for  re- 
demption or  in  transit 


State  bank  circulation  outstanding 

Due  to  National  banks  (not  approved  reserve  agents) 
Due  to  State  and  private  banks  and  bankers  .... 
Due  to  approved  reserve  agents  (see  schedule)      .    . 

Dividends  unpaid 

Individual  deposits  subject  to  check % 

Demand  certificates  of  deposit %  . 

Time  certificates  of  deposit 5  • 

Certified  checks $  . 

Cashier's  checks  outstanding %  ■ 


United  States  deposits 

Deposits  of  United  States  disbursing  officers 

Notes  and  bills  rediscounted 

Bills  payable,  including  certificates  of  deposit  representing 

money  borrowed     

Liabilities  other  than  those  above  stated      .   .  • 


Total 


Cents. 


Note  i. — This  report  is  to  be  made  at  such  times  as  may  be  designated  by 
the  Comptroller  of  the  Currency;  to  be  sworn  to  by  the  president  or  cashier, 
not  by  any  other  officer;  attested  by  not  less  than  three  directors,  and  for- 
warded to  the  Comptroller  of  the  Currency  without  delay.  Each  day's  delay, 
after  five  days,  will  subject  the  bank  to  a  penalty  of  one  hundred  dollars. 
See  Sections  5211  and  5213,  Revised  Statutes  of  the  United  States. 

Note  2. — Be  careful  to  make  full  entries — writing  No,  after  any  item,  for 
which  there  is  no  amount  to  enter. 


251 


SCHEDULES. 


Fill  all  schedules,  writing  in  the  word  "none"  wherever  no  amount  is  to  be 

entered. 


Loans  and  discounts. 


{Including  loans  and  discounts  on  which  officers  and 
directors  are  liable.') 


On  demand  paper  with  one  or  more  individual  or  firm  names  %  . 

On  demand,  secured  by  stocks,  bonds  and  other  personal 
securities I  • 

On  time,  paper  with  two  or  more  individual  or  firm  names  .  $  . 

On  time,  single-name  paper  (one  person  or  firm)  without 
otiier  security $  • 

On  time,  secured  by  stocks,  bonds,  and  other  personal  se- 
curities  I  . 

On  time,  on  mortgages  or  other  real-estate  security  (see 
schedule) %  • 


Total 


Included  in  the  above  are — 
Bad  debts,  as  defined  in  sec.  5204  R.  S.,    % 
Other  suspended  and  overdue  paper    .    .  | 
Liab'sofdirec's(indi'landfirm)  as  payers  | 


Enter  amount  in 
each  of  these  three 
items,  or  write  in 
word  "none  "  if  no 
amount  to  enter. 


Loans  exceeding  the  limit  p7'e scribed  by  section  5200  of  the  Revised  Statutes, 
including  amounts  which  exceed  this  limit  due  frotn  State  and  private 
banks  and  bafikers. 


Name  of  borrower. 


Enter  (uU 
amount  of  loan. 


Name  of  borrower. 


Enter  full 
amount  of  loan. 


Overdrafts. 


or 


Secured : 
Standing  twelve   months 

over 

Standing  six  months  or  over 
Standing  three  months  or  over 

Temporally 

Officers  and  directors     .    .    . 


Unsecured  : 
Standing   twelve    months    or 

over 

Standing  six  months  or  over 
Standing  three  months  or  over 

Temporary 

Ofl&cers  and  directors    .... 


Stocks,  Securities,  etc. ,  {Stocks,  Bonds,  Claims,  fudgments,  and  similar  items 
should  be  included  under  this  head.) 


Enter  number 
shares  of  stock 
or  face  v:ilue 
of  bonds. 


Name  of  corporation 

issuing  stock, 

bonds,  etc. 


Amount  at 

which  carried 

on  books. 


Estimated 

actual  market 

value. 


State     whether      taken 

for  '  debts  previously 
contracted  "  or  other- 
wise. 


252 


From — 


Balances  due  from  or  to  approved  reserve  agents. 

To— 


Enter  name  and  location  of  bank. 


Amount. 


Enter  name  and  location  of  bank.         Amount. 


Checks  and  other  cash  items. 


Checks  and  drafts  on  banks, 
etc.,  in  this  city 

Checks  and  drafts  on  other 
banks     


Average  reserve  and  interest. 

Average  reserve  for  last  thirty  days  (in  bank  or  with  reserve  agents)  was 

per  cent,  of  deposits  and  bank  balances.     The  highest  rate  of  interest 

paid  by  the  bank  on  deposits  is per  cent.,  on  bills  payable  is per  cent.. 

on  notes  and  bills  rediscounted  is per  cent. 


Other  Real  Estate  and  Mortgages  Owned. 


Describe  property, 
state  form  of  con- 
veyance, and  from 
whom  obtained. 


Amount  at 

which 
carried  on 

books. 


Amount  of 
prior  lien 
on  prop- 
erly, if  any. 


Estimated 

actual 

value  of 

property. 


Date  when 
acquired. 


State  whether  ta- 
ken for  "  debts  pre- 
viously contracted,  ' 
or  otherwise. 


Loans  and  Discounts,  Secured  by  Mortgages  or  other  Real  Estate  Security. 


Describe  property, 
state  form  of  convey- 
ance, and  from  whom 
obtained. 


Amount  at  i  Amount  of 
which       j    prior  lien 

carried  on        on  prop- 
books,         erty,  if  any. 


Estimated 

actual 

value  of 

property. 


Date  when 
acquired. 


State  whether  ta- 
ken for  "debts pre- 
viously contracted," 
or  otherwise. 


Certificates  of  Deposit  represe?iting  money  borrowed. 


To  whom  issued 


Amount. 


Demand. 


Time. 


Rate  of 
Interest. 


Liabilities  of  Officers  and  Directors. 


Mames     of     Officers 
and  Directors. 


Liability  (individual 
or  firm)  as  payors. 


Liability  (individual 
or  firm)  as  iiidorsers 
or  guarantors. 


Overdrafts. 


No.  Shares 

Stock 

Owned. 


253 


REPORT  OF  EARNINGS  AND  DIVIDENDS. 

For  form  see  page  256. 

Blanks  for  making  up  this  report  are  furnished  from  the  office  of  the  Comi>- 
troUer  of  the  Currency.  In  filling  out  the  heading  of  the  blank  report  be 
careful  to  enter  — 

First.  Charter  number  of  bank.  Second.  Date  at  which  dividend  period 
ends.  Third.  Date  of  rf(ff/ara/xi?n  of  dividend.  Fourth.  Date  at  which  divi- 
dend is /ayaiJ/zr.     Fifth.  Enter  exact  capital  at  date  period  ends. 

I.  Gross  Earnings  Since  Last  Report. — This  should  represent  the  total  of 
gross  profits  from  all  sources  earned  during  the  dividend  period  covered  by 
the  report,  such  as  discount,  interest,  exchange,  rents,  etc.,  but  no  part  of 
undivided  profits  earned  during  former  periods  should  be  included  in  this 
item. 

a.  Losses  Recovered  Since  Last  Report  (if  any). — This  item  requires  no 
explanation.  Any  profits  realized  which  the  bank  desires  to  show  separately 
can  be  entered  specially  after  the  item. 

Add  these  two  items  together,  and  from  their  sum  deduct  the  following : 

3.  Premiums  on  Bonds  Charged  Off  Since  Last  Report. —  In  case  of  any 
decrease  in  the  market  value  of  any  United  States  bonds  owned  by  the  bank 
occurring  during  the  dividend  period,  such  decrease  should  be  charged  off  on 
the  books  of  the  bank  and  the  amount  entered  here. 

4.  Losses  Sustained  Through  Bad  Debts,  Decrease  of  Values,  etc.,  Since 
Last  Report. — Any  losses  sustained  on  "  loans  and  discounts  "  during  the 
dividend  period,  and  any  decrease  in  the  value  of  banking  house,  furniture 
and  fixtures,  other  real  estate,  securities  of  any  kind  owned  by  the  bank,  and 
the  amount  of  any  bad  debts,  as  defined  by  section  5204,  should  be  included 
here. 

5.  Expenses  and  Taxes  Paid  Since  Last  Report. — Enter  here  the  sum  of 
all  expenses  and  taxes  paid  since  last  report,  whether  they  have  been  charged 
off  or  not. 

The  sum  of  items  3,  4,  and  5  should  be  deducted  from  the  sum  of  items  r 
and  2,  and  the  result  will  be  item  6,  which,  added  to  3,  4,  and  5,  will  of  course 
always  equal  the  total  of  1  and  2. 

6.  Net  Earnings  and  Profits  or  Loss  of  Past  Six  Months  (or  of  dividend 
period,  if  less  than  six  months). — This  represents  the  net  profits  remaining 
after  deducting  the  sum  of  all  items  of  "outgo  "  for  the  dividend  period  from 
the  sum  of  the  items  of  "  income  "  during  the  same  period.  If  the  "  outgo  " 
has  exceeded  the  "  income,"  the  result  will  be  a  "net  loss  "  and  the  figures 
representing  such  loss  should  be  entered  in  red  ink.  In  this  case  the  printed 
words  "  earnings  and  profits  "  should  be  stricken  out,  leaving  the  word  "  loss  " 
against  entry  and  deducted  from  total  of  items  3,  4,  and  5. 

7.  Undivided  Profits  or  Loss  Brought  Forward  from  Last  Report. — Enter 
here  the  balance  of  undivided  profits  remaining  on  hand  at  end  of  the  previous 
dividend  period,  namely,  the  amount  entered  at  item  15  or  21  of  the  last  report. 
Should  this  item  represent  a  loss,  instead  of  a  profit,  the  figures  should  be 
entered  in  red  ink.  This  item  should  always  be  brought  forward  in  full  and 
no  part  of  it  included  in  the  first  section  of  report. 


354 

Should  the  bank  have  been  converted  from  some  other  organization,  the 
profits  on  hand  at  date  of  conversion  should  be  entered  here  as  well  as  undet 
item  17. 

8.  Amount  Withdrawn  from  Surplus  (if  any). — Enter  amount  in  case  there 
has  been  withdrawal  from  this  fund.  It  should  be  borne  in  mind  that,  so  long 
as  surplus  is  below  the  required  20  per  cent. ,  no  portion  of  it  can  be  withdrawn, 
except  for  the  purpose  of  charging  off  losses  incurred,  and  no  more  than  will 
meet  the  losses,  and  then  only  after  any  "  undivided  profits  "  on  hand  have 
first  been  exhausted.  When  the  surplus  exceeds  the  limit  of  20  per  cent., 
the  excess  over  this  limit  may  be  used  for  the  payment  of  dividends  or  other- 
wise, as  the  bank  may  elect. 

The  sum  of  items  12,  13,  and  15  should  always  balance  with  items  6  to  11. 

9.  Reduction  of  Capital  Stock  Since  Last  Report  (if  any). —  Any 
amount  of  reduction  of  capital  is  either  for  the  purpose  of  covering  a  loss  as 
shown  in  item  6  or  to  return  to  the  shareholders  in  the  form  of  a  dividend. 

Should  capital  be  reduced  by  the  cancellation  or  retirement  of  stock  pro- 
rated among  the  shareholders,  a  special  item  should  be  entered  to  that  effect 
in  the  second  and  third  sections  after  items  15  and  19.  This  special  item  will 
be  perpetuated  in  the  third  section. 

10.  Paid  Assessment  on  Capital  Stock  Since  Last  Report  (if  any). — Any 
assessment  on  capital  paid  in  is  for  the  purpose  of  covering  losses  shown  in 
item  6  and  should  only  be  entered  in  this  item.  Any  increase  in  capital  does 
not  enter  into  this  report. 

11.  Surplus  Subscribed  and  Paid  in  by  Shareholders  Since  Last  Report  (if 
any). — Any  money  subscribed  and  paid  in  by  the  shareholders  either  as  a 
surplus  fund  or  as  a  part  of  the  profit  account  should  be  entered  as  indicated 
in  this  item,  substituting  the  word  "profits  "  for  surplus  in  the  latter  case. 

12.  Carried  to  Surplus  Fund  (not  less  than  one-tenth  of  item  6,  unless  sur- 
plus is  already  20  per  cent,  of  capital). — Any  amount  that  has  been  carried  to 
this  fund  in  accordance  with  requirements  of  section  5199.  A  bank  may,  ii 
it  desires,  carry  more  than  one-tenth  of  its  net  earnings  for  a  dividend  period 
to  this  fund  ;  but  so  long  as  the  surplus  fund  is  less  than  20  per  cent,  of  its 
capital,  it  m,ust  carry  at  least  one-tenth  of  its  net  profits  for  any  dividend 
period  to  this  fund  before  it  declares  a  dividend. 

13.  Dividend  of —  per  cent,  (on  capital,  $ ). — Enter  here  the  amount 

distributed  to  stockholders  during  the  dividend  period,  taking  care   to  enter 
the  rate  and  the  amount  of  capital  in  the  proper  blanks. 

14.  Include  amount  of  this  item  in  item  20. 

15.  Amount  of  Net  Profits  Undivided,  or  Loss  to  be  Carried  Forward. — 
Enter  here  the  balance  of  undivided  profits  or  loss  remaining,  after  deducting 
items  12,  13,  and  14  from  items  6  to  11. 

16.  Total  Profits  as  National  Bank  Since  Organization  (less  expenses, 
premiums,  losses,  etc.). — The  amount  to  be  entered  here  is  obtained  by 
adding  item  6  of  the  current  dividend  period  to  item  16  of  the  last  dividend 
report  made. 

17.  Add  Profits  of  Old  Organization  at  Date  of  Conversion. — This  will  ap- 
ply only  in  the  case  of  a  State  bank  converted  to  a  National  bank  which  had 
a  balance  of  profits  on  hand  at  time  of  conversion.  This  balance,  of  course, 
remains  unchanged,  and  must  be  the  same  in  every  report. 


255 

ig.  Total  Surplus  Fund  Proper  at  Date  of  this  Report. — This  is  oblained 
by  adding  the  amount  carried  to  surplus  fund  during  the  current  dividend 
period  (item  12),  if  any,  to  item  19  of  the  last  report  made. 

20.  Total  Dividend  Since  Organization  as  National  Bank  is  obtained  by 
adding  the  amount  of  any  dividend  declared  during  the  current  period  (item 
13)  to  item  20  of  the  last  report  made. 

21.  Total  Other  Profits  on  Hand  (same  as  item  15  of  this  report). — This, 
like  item  15,  represents  thebalanceof  "  undivided  profits  "  or  loss  remaining 
at  the  close  of  the  current  dividend  period. 

The  sum  of  items  19,  20,  and  21  should  exactly  equal  and  balance  the  sum 
of  items  16,  17,  and  18. 

There  are  three  classes  of  money  which  may  come  into  the  bank  :  ist, 
(item  16),  total  profits  as  a  National  bank  ;  and  (item  17),  profits  brought 
into  the  bank  from  a  converted  association,  and  3rd  (item  18),  money  which 
was  not  earned,  but  was  paid  into  the  bank  for  special  reasons. 

The  dividend  report  must  be  signed  either  by  the  president  or  the  cashier 
of  the  bank.  No  other  officer  of  the  bank  is  authorized  by  law  to  sign  it.  The 
oath  of  the  oflScer  signing  may  be  made  before  any  officer  qualified  to  admin- 
ister an  oath  and  affix  a  seal.  An  exact  copy  of  each  dividend  report  made 
to  the  Comptroller  should  always  be  retained  by  the  bank  on  the  extra  blank 
furnished  for  this  purpose.  Each  bank  is  allowed  to  select  its  semi-annual 
dividend  periods,  and  must  render  a  report  of  its  earnings  or  loss  for  that 
period,  whether  it  has  declared  a  dividend  or  not.  The  law  requires  that 
whenever  a  dividend  is  declared  by  a  bank,  whether  semi-annually  or  oftener, 
the  report  of  same  must  be  forwarded  to  the  Comptroller  within  ten  days  after 
declaring  the  dividend.  (Section  5212.)  Section  5213  prescribes  a  penalty 
for  failure  to  forward  the  dividend  report  within  the  required  time. 


EXPLANATION  OF  REPORT  OF  EARNINGS  AND  DIVIDENDS. 

Section  i  deals  only  with  the  profits  realized  and  losses  sustained  during 
the  period  being  reported,  or  since  last  report.  No  part  of  the  profits  earned 
or  losses  sustained,  which  have  been  previously  reported  (except  as  indicated 
in  item  2),  are  to  be  included  in  this  section.  Please  see  that  each  section 
balances. 

Section  2  deals  only  with  the  net  profits  (or  loss)  of  current  period  and  the 
undivided  profits  of  previous  periods,  or  losses,  if  any  (item  11  of  last  report); 
and  any  amounts  which  may  have  been  withdrawn  from  surplus  fund,  or  ob- 
tained from  sources  other  than  through  the  earning  capacity  of  the  bank,  and 
the  disposition  of  such  amounts. 

Section  3  deals  only  with  the  total  money  received  from  all  sources  and 
its  distribution  into  surplus  fund,  dividends  declared,  and  undivided  profits 
on  hand. 

Note. — This  report  is  to  be  made  semi-annually  to  the  Comptroller  of  the 
Currency.  If  no  dividend  has  been  declared,  the  report  is  still  required, 
showing  the  earnings  of  the  bank  and  the  disposition  of  the  same. 


356 


No.  64. 
No.  of  Bank No.  of  Div.. 

Capital  stock  at  clou  of  this  dividtnd  period  $ 

Report  of  Earnings  and  Dividends  of 

"The "   located  at ,  in  tki 

State  of   for  the  period  of  , months  endinff 

/90    .    Declared._ „ ,190    .    PayabU ,190    . 


FIRST 


3.  Premiums  on  bonds  charged 

off  since  last  report  (if  any) 

4.  Losses  sustained  through  bad 

debts,    decrease   of  values, 
etc.,  since  last  report .  .  •  • 

5.  Expenses     and   taxes     paid 

since  last  report 

Total  of  items  3,  4  and  5 

•6.  Net  earnings   and  profits  or 

loss    of  past    six    months 

carried  down  to  second  sec- 

Uon 

Total 


SECTION. 

1.  Gross  earnings  since  last  re- 
port   

2.  Losses   recovered   since    last 
report  (if  any) 


Total 


13.  Carried  to  surplus  fund  (not 
less  than  one-tenth  of  item 
6,  unless  surplus  is  already 
20  per  cent,  of  capital)    .  .   . 

13.  Dividend  of per  cent,  (on 

capital,  I )  .  .  .  . 

14.  Dividend  of. per  cent,  re- 

turned to  shareholders  on 
account  of  reduction  of  cap- 
ital stock 

15.  Amount  of  net  profits  undi- 

vided or  lo.ss  to  be  carried 
forward  in  full  to  item  7  of 
next  report 


ToUl 


19.  Total  surplus  fund  proper  at 
date  of  this  report 

»o.  Total  Dividends  since  organ- 
ization as  National  Bank  .   . 

21.  Total  other  profits  on  hand 
(same  as  item  15  of  this  re- 
port)     


SECOND    SECTION. 

*6 


8. 


THIRD 


Total 


Net  earnings  and  profits  or 
loss  of  past  six  months 
brought  down  from  first 
section 

Undivided  profits  or  loss 
brought  forward  in  full  from 
item  15  of  last  report  .   .   .   . 

Ajnount  withdrawn  from  sur- 
plus since  last  report  (if  any) 
9.  Reduction  of  capital  stock 
since  last  report  (if  any)    .   . 

10.  Paid    as.sessmcnt    on    capital 

stock    since    last  report  (if 
any)     

11.  Surplus  subscribed  and  paid 

in  by  shareholders  since  last 
report  (if  any) 

Total 


SECTION. 

16.  Total  profits  as  National  bank 
since  organization  (less  ex- 
penses,   premiums,    losses, 

etc.) 

Add  profits  of  old  organization 
at  date  of  conversion  to  the 

National  system 

Combined  total  of  items  9, 10, 
and  II  of  this  report,  and 
item  18  of  last  report .  .   .   . 


17- 


ti8. 


Total 


State  of 


County  of— 


J 


Sworn  to  and  subscribed  before  me  this  • 


■  day  of - 


-1  190 — • 


I, 


,  Cashier  of  the  above-named  bank,  do  solemnly  swear  that  the 


above  statement  is  true,  to  the  best  of  my  knowledge  and  belief. 


Cashier. 


•  In  case  the  loss  exceeds  the  profits  for  the  six  mouths,  the  excess  of  loss  over  the 
profits  should  be  entered  in  item  6  in  red  ink  and  deducted  from  total  amount  charged  off 
(items  3,  4,  and  5). 

t  This  item  is  not  to  include  any  transactions  in  these  accounts  which  have  not  be«n 
previously  reported  in  thla  manner. 


CHAPTER   II. 


LAWFUL  MONEY  RESERVE  OF  NATIONAL  BANKS. 


The  National  Bank  Act  requires  that  National  Banks  shall  maintain  a 
reserve  to  protect  deposits.  The  law  bearing  on  the  subject  is  found  in  sec- 
tions 5 19 1,  5192  and  5195  of  the  Revised  Statutes,  as  modified  by  section  2, 
part  of  section  3  of  the  Act  of  June  20,  1874;  part  of  section  12  of  July,  12, 
1882,  the  Act  of  March  3,  1887,  and  the  Act  of  July  14,  1890, 

On  Deposits  Only. — Since  the  passage  of  the  Act  of  June  20,  1874,  the 
only  reserve  required  is  a  certain  percentage  of  the  aggregate  deposits. 

Reserve  Regulations. — The  law  divides  the  banks  into  three  classes,  as  to 
reserve  required,  according  to  location  : 

1st.  Cent7-al  Reserve  City  Banks: — Section  5195  and  Act  of  March  3, 
1887,  designate  certain  cities  "  Central  Reserve  Cities,"  viz.  :  New  York,  Chi- 
cago and  St.  Louis,  each  bank  in  which  is  required  to  keep  a  reserve  equal  to 
twenty-five  per  cent,  of  its  deposits,  and  this  reserve  to  be  in  the  bank's  own 
vaults. 

2nd.  Reserve  City  Banks : — Section  5191  names  sixteen  cities,  including 
the  preceding,  which  are  called  "  Reserve  Cities,"  in  which,  each  bank  is 
required  to  keep  a  reserve  equal  to  twenty-five  per  cent,  of  its  deposits,  and 
to  these,  under  the  Act  of  March  3,  1887,  have  been  added  other  cities  (see 
full  list,  page  263) ;  but  the  banks  in  reserve  cities  outside  of  central  reserve 
cities  are  allowed  to  keep  one-half  of  their  lawful  reserve  with  National 
Banks,  approved  by  the  Comptroller  of  the  Currency,  in  central  reserve  cities. 

3rd,  Banks  not  in  Reserve  Cities: — Section  5 191  further  provides  that 
each  bank  located  elsewhere  than  in  a  reserve  city  must  keep  a  reserve  equal 
to  fifteen  per  cent,  of  its  deposits,  and  section  5192  provides  that  three  fifths 
of  this  reserve  may  consist  of  balances,  due  the  bank,  from  banks  approved 
by  the  Comptroller  of  the  Currency,  in  any  of  the  reserve  cities,  the  otiier 
two-fifths  to  be  in  bank. 

Deposits  Requiring  Reserve  : — Reserve  is  to  be  computed  on  the  aggregate 
deposits,  /.  e.,  on  all  deposits  which  appear  on  the  balanced  statement  of  the 
bank.  For  purposes  of  computing  the  reserve  required,  deposits  are  divided 
into  two  classes.  General  Deposits  and  Bank  Deposits.  The  first  consist  of 
the  following :  "  Individuals  deposits,"  including  "  deposits  subject  to  check,'' 
"demand  certificates  of  deposit,"  "time  certificates  of  deposit,"  "certified 
checks,"  " cashier's  checks  outstanding''  or  other  like  evidence  of  deposit; 
"  Dividends  unpaid  ; ''  "  United  States  deposits  ;  "  and  "  deposits  of  United 
States  disbursing  officers."  By  "  Bank  Deposits"  is  meant  the  total  balance 
17  257 


2>;8 

due  National  banks  and  other  banks  and  bankers  after  deducting  amounts 
dtie  from  such  banks.  In  making  such  deductions,  net  balances  with  approved 
agents,  are  not  to  be  deducted  from  the  amounts  due  to  banks,  as  a  certain 
portion  of  such  deposits  may  be  counted  as  part  of  the  reserve,  so  cannot  be 
used  also  to  offset  liability,  but  any  excess  with  approved  agents  above  the 
proportion  of  reserve  allowed  to  be  with  them  can  be  utilized,  when  ascer- 
tained, to  reduce  balance  due  to  banks. 

Deductions  Allowed:  Certain  deductions  are  allowed  to  be  made  from 
the  general  deposits,  viz.,  exchanges  for  clearing-house,  checks  on  other 
banks  in  same  place,  and  National  Bank  notes  of  other  banks. 

General  Funds  Available  for  Reserve. — The  fands  available  for  reserve  in 
bank  are  comprised  :  First.  Under  the  general  term  lawful  money,  which  has 
been  held  to  mean  gold  coin  of  the  United  States,  silver  dollars,  fractional 
silver  coin,  and  legal  tender  notes  and  Treasury  notes  of  July  14,  1890.  By 
special  statute,  clearing-house  certificates  are  also  available  for  reserve, 
(Section  5192,  Revised  Statutes.)  In  the  same  way  are  available  United 
States  gold  and  silver  certificates  (Section  12  of  the  Act  of  July  12,  1882)  and 
United  States  certificates  of  deposit  for  legal  tender  notes  (Section  5193,  Re- 
vised Statutes). 

Five  Per  Cent.  Fund  Set-off :  Section  3  of  the  Act  of  June  20,  1874,  requir- 
ing that  each  National  Bank  be  required  to  keep  at  all  times  with  the  Treas- 
urer of  the  United  States,  in  lawful  money,  a  sum  equal  to  five  per  cent,  of 
its  circulation,  also  provides  that  this  five  per  cent,  fund  may  be  counted  as 
reserve  on  deposits,  but  no  surplus  in  this  fund  above  five  per  cent,  of  circu- 
lation can  be  thus  counted. 

COMPUTING  THE  RESERVE. 

The  computation  of  the  reserve  is  a  simple  matter.  The  Bank  Act  as 
amended  states,  it  is  to  be  either  twenty-five  per  cent,  or  fifteen  per  cent, 
(according  to  a  bank's  location)  of  the  ''aggregate  deposits;"  what  is  com- 
prised in  these  is  given  in  detail,  in  the  form  furnished  by  the  Comptroller  of 
the  Currency  ;  bank  deposits  are  included,  but  these  need  to  be  ascertained 
separately  :  if  the  reciprocal  accounts  show  a  net  balance  due  from  banks,  it 
must  be  omitted  from  the  calculation,  but  if  there  is  shown  a  balance  due  to 
banks  this  amount  is  to  be  added  to  the  other  deposits.  [Should  the  amounts 
due  from,  exceed  the  amounts  due  to  banks,  such  an  excess  cannot  be  con- 
sidered as  decreasing  the  liability  for  other  deposits,  as  amounts  due  from 
can  only  be  used  to  offset  liability  for  amounts  due  to  banks.]  From  the  total 
deposits  certain  specified  items  are  allowed  to  be  deducted ;  then  as  the  five 
per  cent,  fund  with  the  U.  S.  Treasurer  is  allowed  to  be  counted  as  reserve,  the 
amount  of  deposits  that  the  fund  will  cover,  {i.e.,  4  or  6%  times  the  fund, 
according  to  location)  is  to  be  subtracted,  thus  is  ascertained  the  net  amount 
of  deposits  requiring  reserve,  then  twenty-five  per  cent,  or  fifteen  per  cent,  of 
this  remainder  is  the  reserve  required,  and  \  or  fths  of  this  according  to  loca- 
tion must  be  in  bank,  more  or  all  of  it  may  be,  but  so  much  must  be ;   the 


259 

balance  may  be  with  reserve  agents  (/.  e.,  one-half  or  three-fifths  of  the 
amount).  If  it  is  seen  that  there  is  a  larger  amount  with  reserve  agents  than 
the  one-half  or  three-fifths  allowed  to  count  as  reserve,  this  surplus  or  excess 
cannot  be  counted  as  reserve,  but  may  be  treated  as  due  from  banks  and 
deducted  from  the  balance  due  to  banks  (if  there  is  a  balance  due  to  banks 
to  offset),  thus  the  total  deposits  on  which  the  reserve  is  required  will  be  de- 
creased, making  the  reserve  requirement  less,  which  is  sometimes  an  object. 
A  short  method  of  utilizing  this  surplus  is  given  in  our  rules,  otherwise  the 
operation  is  quite  long,  for,  after  the  surplus  with  reserve  agents  (found  by  the 
first  calculation)  is  applied  to  reduce  the  amount  due  to  banks,  the  total  de- 
posit requiring  reserve  is  also  reduced,  hence  the  amount  allowed  with  reserve 
agents  as  reserve  is  made  less,  so  a  further  surplus  with  reserve  agents  is 
developed  ;  this,  in  turn,  is  applied  to  reduce  amount  due  to  banks,  and  the 
reduction  lessens  again  the  total  deposits  requiring  reserve,  so  also  lessening 
again  the  amount  alloued  with  reserve  agents  as  reserve:  thus  another  sur- 
plus is  developed,  which  is  applied,  as  the  preceding,  and  this  operation 
repeated  until  only  the  exact  pioportion  of  reserve  allowed  with  agents  is 
reached,  and  thus  the  entire  surplus  or  excess  with  reserve  agents  is  utilized, 
to  reduce  the  aggregate  deposits  and  so,  the  reserve  required  ;  the  short 
method  given  in  our  rules  avoids  this  long  operation. 

It  will  be  seen  that  the  only  item  requiring  special  attention  is  th«  surplus 
with  reserve  agents  above  the  amount  of  reserve  allowed  to  be  with  them, 
and  this  needs  to  be  considered  only  when  the  home  reserve  is  short,  requir- 
ing the  excess  to  be  utilized,  to  reduce  the  amount  of  reserve  required,  but,  as 
before  stated,  there  must  be  a  balance  due  to  banks,  to  make  it  possible  to 
utilize  such  excess  or  any  portion  of  it. 

RULES  FOR  COMPUTING  RESERVE. 

For  Forms  see  pages  265,  266. 

The  following  seven  rules  probably  cover  all  cases  that  may  arise : 

I.  For  banks  located  in  Central  Reserve  Cities. 

Ride  : — Obtain  the  total  of  general  deposits,*  deduct  exchanges  for  clear- 
ing-house, checks  on  other  banks  in  same  place  and  National  Bank  notes  of 
other  banks  ;  then  deduct  amount  due  from  banks  from  amounts  due  to 
banks,  and  the  remainder,  if  a  balance  due  to  banks,  add  to  the  net  general 
deposits  f  and  deduct  from  the  total,  four  times  the  five  per  cent,  redemption 
fund,  X  twenty-five  per  cent,  of  the  remainder  is  the  required  reserve  which 
must  all  be  in  bank  in  one  of  the  forms  of  lawful  money  or  certificates  avail- 
able for  reserve,  heretofore  described. 

*See  items  in  form,  page  265. 

■j-  If  amounts  due  from  banks  equal  or  exceed  amounts  due  to  banks,  both 
amounts  must  be  omitted  from  the  computation. 
\  This  being  the  amount  of  deposits  covered  by  it. 


26o 

2.  For  banks  located  in  Reserve  Cities  other  than  Central  Reserve  Cities, 
where  there  is  no  excess  with  approved  reserve  agents  in  Central  Reserve 
Cities. 

Rule : — Obtain  the  total  of  general  deposits,*  deduct  exchanges  for  clear- 
ing-house, checks  on  other  banks  in  same  place  and  National  Bank  notes  of 
other  banks  ;  then  deduct  amount  due  from  banks  from  amount  due  to  banks, 
and  the  remainder,  if  a  balance  due  to  banks,  add  to  the  general  deposits  f 
and  deduct  from  total,  four  times  the  five  per  cent,  redemption  fund,  \  twenty- 
five  per  cent,  of  the  remainder  is  the  required  reserve ;  one-half  at  least  of 
this  must  be  in  bank ;  the  remaining  half  may  be  with  approved  reserve 
agents.  There  is  no  Hmit  on  the  amount  of  the  reserve  which  may  be  kept 
in  bank, 

3.  For  banks  located  in  Reserve  Cities  other  than  Central  Reserve  Cities, 
when  evidently  the  home  reserve  is  close  and  there  is  an  excess  over  the 
permitted  one-half  held  with  reserve  agents,  and  when  the  amounts  due  to 
banks  are  so  large  that  it  is  apparent  they  will  exceed  all  amounts  due  from 
banks,  even  including  all  excess  with  reserve  agents. 

Rule : — Obtain  the  total  of  general  deposits,*  deduct  exchanges  for  the 
clearing-house,  checks  on  other  banks  in  the  same  place  and  National  Bank 
notes  of  other  banks  ;  then  deduct  amount  due  from  banks  from  amounts  due 
to  banks,  and  the  remainder,  if  a  balance  due  to  banks,  add  to  the  net  general 
deposits  t  and  deduct  from  the  total,  four  times  the  five  per  cent,  redemption 
fund,  X  from  the  result  take  the  whole  amount  due  from  reserve  agents.^ 
One-seventh  of  the  remainder  will  be  the  exact  reserve  required  at  home 

This  short  method  of  applying  the  excess  with  the  reserve  agents  to  reduce 
the  reserve  required  at  home  is  based  on  the  known  ratio  of  the  reserve 
required  at  home  to  deposits — in  this  case  (of  25  per  cent,  banks)  it  is  one- 
eighth.  What  is  wanted  is  to  apply  the  excess  with  reserve  agents  to  reduce 
reserve  liabihty  on  deposits,  and  it  is  evident  in  deducting  the  entire  balance 
with  reserve  agents  from  the  deposits  requiring  reserve,  there  is  left  seven- 
eighths  of  the  final  net  deposits,  \i.  e.,  of  the  final  net  amount  which  will 
require  reserve,]  since  in  the  deposits  ascertained  are  two  quantities,  eight - 
eighths  of  the  final  net  deposits  and  eight-eighths  of  an  amount  to  be  offset  by 
the  eight-eighths  of  excess  with  reserve  agents ;  and  in  the  reserve  agents' 
balance  i§  two  quantities,  one-eighth  of  the  amount  of  final  net  deposits  and 
the  eight-eighths  of  excess,  so  the  total  balance  with  agents  being  subtracted, 
there  remains  seven-eighths  of  the  final  net  deposits,  and  one-seventh  of  this 
remainder  is  one-eighth,  which  is  the  amount  of  reserve  required  at  home. 

*  See  items  in  form,  page  265. 

t  If  amounts  due  from  banks  equal  or  exceed  amounts  due  to  banks,  both 
amounts  must  be  omitted  from  the  computation. 

X  This  being  the  amount  of  deposits  covered  by  it. 

{ If  reciprocal  accounts  are  kept,  then  by  the  whole  amount  is  meant,  the 
net  balance  due  from  the  agents. 


20I 

4.  For  banks  located  in  Reserve  Cities  other  than  Central  Reserve  Cities 
where  evidently  the  home  reserve  is  close,  and  there  is  an  excess  over  the 
permitted  one-half  with  the  reserve  agents,  and  when  the  total  of  amounts 
due  to  banks  exceeds  the  total  of  amounts  due  from  banks,  but  not  so  largely 
as  to  plainly  show  that  it  will  exceed  the  total  due  from  banks  plus  the  excess 
over  amount  allowed  as  reserve  with  the  reserve  agents. 

Rule: — Obtain  the  total  of  general  deposits,*  deduct  exchanges  for  the 
clearing  house,  checks  on  other  banks  in  same  place,  and  National  Bank 
notes  of  other  banks;  then  deduct  amount  due  from  banks  from  amounts 
due  to  banks,  and  the  remainder,  if  a  balance  due  to  banks,  add  to  tlie  gene- 
ral net  deposits,!  and  deduct  from  the  total  four  times  the  five  per  cent,  re- 
demption fund. J  Take  one-eighth  of  the  remainder,  subtract  this  from  the 
total  balance  due  the  reserve  agents,  and  the  remainder  equals  seven-eighths  of 
the  total  excess  with  reserve  agents,  and  by  adding  one  seventh  of  this 
amount  to  it  we  have  the  full  excess  available  to  apply  against  bank  deposits 
(/'.  e.,  against  the  net  amount  due  to  banks)  ;  if  this  excess  equals  or  is  less 
than  the  balance  due  to  banks,  then  the  whole  can  be  applied,  and  this  is 
done  by  taking  one-eighth  of  the  excess  and  deducting  it  from  the  deficiency 
in  home  reserve  (the  proportion  of  the  excess  available  for  this  purpose), 
thus  reducing  or  perhaps  cancelling  it^ 

If  the  excess  is  found  to  be  larger  than  the  net  balance  due  to  banks  then, 
instead  of  one-eighth  of  the  excess,  one-eighth  of  the  amount  of  balance  due 
to  banks  only  can  be  apphed  to  reduce  the  deficiency  in  home  reserve,  as 
the  use  of  the  excess  is  limited  by  the  amount  of  such  balance. 

This  short  method  of  applying  the  excess  is  the  same  principle  as  in  the 
preceding  rule ;  we  ascertain  readily  what  seven-eighths  of  the  excess  with 
the  reserve  agents  is,  that  is,  one-eighth  of  the  deposits  ascertained  contains 
two  quantities,  viz. :  one-eighth  of  the  net  deposits,  i.  e.,  of  the  final  net 
amount  on  which  the  reserve  is  required,  and  one-eighth  of  an  amount  which 
is  to  be  offset  by  the  excess  with  reserve  agents, — on  the  other  hand,  the 
net  balance  of  reserve  agents  contains  two  quantities,  viz. :  one-eighth  of 
final  net  amount  on  which  reserve  is  required,  and  the  full  eight-eighths  of  the 
excess,  so  by  subtracting  there  is  left  seven-eighths  of  the  excess,  and  by  adding 
one-seventh  of  this  amount  to  it  we  have  the  full  eight-eighths  that  can  be 
applied  to  reduce  the  reserve  required,  and  ^th  of  this  (or  what  is  the  same, 
one-seventh  of  the  seven-eighths)  is  the  propordon  that  can  be  applied  on 
Home  reserve. 


*See  items  in  form,  page  265. 

f  If  amounts  due  from  banks  equal  or  exceed  amounts  due  to  banks,  both 
amounts  must  be  omitted  from  the  computation. 

I  This  being  the  amount  of  deposits  covered  by  it. 

g  Having  ascertained  what  seven-eighths  of  the  excess  is,  often  it  is  apparent 
that  the  total  excess  is  less  than  net  balance  due  banks,  and  so  one-seventh 
of  the  Yi  (which  is  Y%  of  total)  is  at  once  seen  to  be  the  amount  to  apply 


262 

5.  For  banks  not  in  Reserve  Cities  when  there  is  no  excess  with  approved 
reserve  agents. 

Rule  : — Obtain  the  total  of  general  deposits,*  deduct  exchanges  for  clearing 
house,  checks  on  other  banks  in  same  place,  and  National  Bank  notes  of 
other  banks ;  then  deduct  amounts  due  from  banks  from  amounts  due  to 
banks,  and  the  remainder,  if  a  balance  due  to  banks,  add  to  the  net  general 
deposits,!  and  deduct  from  the  total  six  and  two-third  times  the  five  per  cent, 
redemption  fund  ;  J  fifteen  per  cent  of  the  remainder  is  the  required  reserve. 
Two-fifths  at  least  of  this  must  be  in  bank,  the  remaining  three-fifths  may  be 
with  approved  reserve  agents.  There  is  no  limit  as  to  the  amount  of  the 
reserve  which  may  be  kept  in  bank. 

6.  For  banks  not  in  Reserve  Cities  when  evidently  the  home  reserve  is 
close,  and  there  is  an  excess  over  the  permitted  three-fifths  with  the  reserve 
agents,  and  when  the  amounts  due  to  banks  are  so  large  that  it  is  apparent 
that  the  excess  with  reserve  agents,  added  to  the  amounts  due  from  banks, 
will  not  exceed  amounts  due  to  banks. 

Ru/e  : — Obtain  the  total  of  general  deposits,  *  deduct  exchanges  for  clear- 
ing house,  checks  on  banks  in  same  place,  and  National  Bank  notes  of  other 
banks  ;  then  deduct  amount  due  from  banks  from  amounts  due  to  banks,  and 
the  remainder,  if  a  balance  due  to  banks,  add  to  the  net  general  deposits.f 
and  deduct  from  the  total  six  and  two-third  times  the  five  per  cent,  redemp- 
tion fund ;  X  from  the  remainder  take  the  whole  amount  with  approved  re- 
serve agents,  and  six  ninety-firsts,  or,  approximately,  one  fifteenth  of  the 
result  is  the  exact  home  reserve  required. 

This  short  method  of  ascertaining  the  home  reserve  is  similar  to  that  given 
in  Rule  3  ;  in  deducting  the  entire  balance  with  reserve  agents  from  the 
deposits  ascertained,  ninety-one  one-hundredths  of  the  net  deposits  remain, 
since  in  the  deposits  are  two  quantities,  viz. :  one  hundred  one-hundredths  of 
the  final  net  deposits  requiring  reserve,  and  one  hundred  one-hundredths  of 
an  amount  to  be  offset  by  the  excess  with  reserve  agents  ;  on  the  other  hand, 
in  the  reserve  agents'  balance  are  two  quantities,  viz. :  nine  one-hundredths 
(three-fifths  of  fifteen  percent.)  of  final  net  deposits,  and  one  hundred  one- 
hundredths  of  the  excess,  and  by  subtracting  the  latter  from  the  former  ninety- 
one  one-hundredths  of  the  final  net  deposits  remain,  and  six  ninety-firsts  of 
this  is  six  per  cent.,  [two-fifths  of  fifteen  per  cent.],  the  reserve  required  at 
home. 

7.  For  banks  not  in  Reserve  Cities  when  the  home  reserve  is  close,  and  there 
is  an  excess  over  the  permitted  three-fifths  with  the  reserve  agents  and  when 
the  total  of  amounts  due  to  banks  exceeds  the  total  of  amounts  due  from 
banks,  but  not  so  largely  as  to  plainly  show  that  it  will  exceed  the  total  due 
from  banks  plus  the  full  surplus  with  reserve  agents. 

*See  items  in  form,  page  266. 

f  If  amounts  due  from  banks  equal  or  exceed  amounts  due  to  banks,  both 
amounts  must  be  omitted  from  the  computation. 
J  This  being  the  amount  of  deposits  covered  by  it. 


263 

Rule: — Obtain  the  total  of  general  deposits,*  deduct  exchanges  for  the 
clearing  house  checks  on  other  banks  in  the  same  phice  and  National  Bank 
notes  for  other  banks,  then  deduct  amount  due  from  banks  from  amounts 
due  to  banks ;  and  the  remainder,  if  a  balance  due  to  banks,  add  to  the  gen- 
eral net  deposits,!  and  deduct  from  the  total  six  and  two-thirds  times  the  five 
percent,  redemption  fund;  %  take  nine  per  cent,  of  this  amount  (/.  e.^  three- 
fifths  of  fifteen  per  cent.)  and  substract  it  from  the  total  balance  with  reserve 
agents,  the  remainder  will  be  ninety-one  one-hundredths  of  the  excess  with 
reserve  agents,  available  to  reduce  reserve  liability  on  deposits,  and  by  find- 
ing and  adding  nine  one-hundredths,  or  say  one-tenth  of  the  ninety-one  one- 
hundredths  to  this  amount,  the  total  excess  is  obtained ;  if  this  excess  is  equal 
to  or  less  than  the  balance  due  to  banks,  then  the  whole  can  be  utilized  and 
the  proportion  available  to  apply  on  home  reserve  is  found  by  taking  six 
per  cent,  of  the  excess  (/.  <?.,  two-fifths  of  fifteen  per  cent.)  and  deducting  it 
from  the  amount  of  deficiency  in  home  reserve,  thus  reducing  or  perhaps 
cancelling  it.  If  the  excess  is  greater  than  the  balance  due  to  banks,  then 
instead  of  six  per  cent,  of  the  excess,  six  per  cent,  of  the  amount  of  balance 
due  to  banks  only  can  be  applied  to  reduce  the  deficiency  in  home  reserve, 
as  the  use  of  the  excess  is  limited  by  the  amount  of  such  balance. 

The  explanation  of  this  short  method  is  similar  to  that  given  in  Rule  IV. 
By  substracting  nine  per  cent.  (/.  e.,  three-fifths  of  fifteen  per  cent.)  of  the 
net  deposits  from  the  total  balance  with  reserve  agents,  the  remainder  is 
equal  to  ninety-one  one-hundredths  of  the  excess  with  reserve  agents,  since 
in  the  balance  with  reserve  agents  are  two  quantities,  the  nine  per  cent,  of 
the  final  net  deposits  and  the  full  one  hundred  one-hundredths  of  the  excess 
with  said  agents,  and  in  the  nine  per  cent,  of  the  deposits  is  the  nine  per 
cent,  of  the  final  net  deposits  and  nine  one-hundredths  of  an  amount  which 
may  be  offset  by  an  equal  amount  of  excess  with  reserve  agents,  so  by  sub- 
stracting there  is  left  ninety-one  one-hundredths  of  the  amount  of  excess,  and 
then  by  finding  and  adding  nine  one-hundredths,  we  ascertain  the  total  excess 
to  be  applied,  or  it  is  sufficiently  close  to  add  one- tenth  of  the  ninety-one 
one-hundredths. 

AVERAGE  RESERVE. 

The  Comptroller  of  the  Currency  requires  that  in  each  report  of  condition 
of  bank  called  for  by  him,  there  shall  be  a  statement  of  its  average  reserve 
on  deposits  for  the  preceding  thirty  days.  The  average  reserve  for  this  or 
any  other  period  may  be  ascertained  by  finding  the  net  deposits  requiring 
reserve  for  each  day  in  that  period,  and  adding  the  results  together  for  a 
divisor.  In  the  same  way  the  reserves  held  on  the  same  days  should  be 
added  together  for  a  dividend.     The  quotient  will  be  the  percentage  of  aver- 

*  See  items  in  form,  page  266. 

f  If  amounts  due  from  banks  equal  or  exceed  amounts  due  to  banks,  both 
amounts  must  be  omitted  from  the  computation. 
J  This  being  the  amount  of  deposits  covered  by  it. 


264 

age  reserve  for  the  period,  or  take  the  percentage  of  reserve  for  each  busi- 
ness day  for  the  period,  and  divide  the  total  by  the  number  of  such  days. 
To  obtain  this  average  reserve  a  daily  and  exact  record  of  the  amount  of 
each  kind  of  currency  must  be  kept,  and  in  assorting  the  cash.  National  bank 
notes  should  be  separated,  and  from  these,  the  notes  of  the  bank's  own  issue. 
A  record  should  also  be  kept  of  daily  net  balances  of  the  various  kinds  of 
deposits,  and  on  the  other  hand  of  the  five  per  cent,  fund,  the  cash  reserve  in 
bank  and  the  amount  of  balance  with  reserve  agents  not  exceeding  the  one- 
half  or  three- fifths  of  reserve  allowed  with  them. 

APPROVED  RESERVE  AGENTS. 

Any  bank  outside  of  the  reserve  cities  may  select  any  National  banks  within 
any  such  cities  as  depositaries  for  its  funds,  and  such  funds  so  deposited, 
when  the  selection  is  approved  by  the  Comptroller,  are  allowed  to  be  counted 
as  a  part  of  the  required  reserve  of  the  depositing  bank.  In  the  same  way 
banks  in  reserve  cities  may  select  for  approved  agents  banks  in  central  reserve 
cities.  The  bank  making  selection  writes  to  the  Comptroller  of  the  Currency 
for  his  approval  of  the  bank  or  banks  chosen. 

THE  RESERVE  CITIES. 

The  original  sixteen  named  in  section  5191,  are  Albany,  Baltimore,  Boston, 
Cincinnati,  Chicago,  Cleveland,  Detroit,  Louisville,  Milwaukee,  New  Orleans, 
New  York,  Philadelphia,  Pittsburg,  St.  Louis,  San  Francisco,  Washington. 
To  these  have  been  added  under  Act  of  March  3,  1887:  Kansas  City,  St. 
Joseph,  Omaha,  Brooklyn,  St.  Paul,  Minneapohs,  Des  Moines,  Lincoln,  Neb. ; 
Savannah,  Ga.  ;  Houston,  Tex 

RICHMOND  AND  CHARLESTON, 

although  named  in  section  5192  among  the  cities  wherein  fifteen  per  cent, 
banks  are  permitted  to  deposit  three-fifths  of  their  reserves,  are  not  named 
in  section  5191  among  the  cities  wherein  banks  are  required  to  keep  the 
larger  reserve  of  twenty-five  per  cent. ;  this  larger  reserve  is  principally 
required  because  of  the  greater  responsibility  incurred  by  receiving  the 
deposit  of  bank  reserves.  For  this  reason  no  banks  located  in  Richmond 
or  Charleston  have  ever  been  approved  as  reserve  agents  by  the  Comptroller, 


265 


2  Net  Bank  Deposits  (Net  balance  due  banks  if  any) 

[If  net  balance  is  due  from  banks,  then  there  are  no  bank  deposits  requiring  reserve, 
and  as  such  balance  cannot  offset  any  other  deposits,  omit  it  entirely-] 

The  sum  is  the  total  Deposits  on  which  reserve  is  required,  >iz 

Deduct  4  times  the  five  per  cent.  (5% )  fund  (t.  e.  the  amount  of  deposits 

covered  by  this  fund  as  reserve) 

*  N9i  Deposits  requiring  reserve  is 

25%  of  this  is  the  total  Reserve  required,  viz.  I  $ 

Proportion  of  Reserve  to  be  in  bank  is  %,  viz.     |  $ 

Any  excess  with  Reserve  Agents  above  the  proportion  allowed  to  be  with  them  can 
be  counted  as  due  from  banks,  so  if  the  Home  Reserve  is  short  and  there  is  a  bal- 
ance due  banks,  the  excess  with  Agents  can  be  used  to  lessen  Reserve  required. 
The  following  are  short  methods  for  applying  it : — 

Rule  A. — If  the  excess  is  considerably  less  than  the  net  balance  due 
banks,  subtract  from  the  Net  deposits  >  the  entire  net  balance  with  Reserve 

Agents,' viz 

One  seventh  of  the  remainder \ 

is  the  exact  Reserve  required  to  be  in  bank,  viz 

Rule  B. — If  the  excess  is  evidently  near  the  amount  of  net  balance 

<lue  banks.'  from  the  net  balance  due  from  Reserve  Agents,*  viz 

subtract  the  amount  of  Reserve  required  in  bank  as  first  calculated,  yiz.    . 

•f 


Form  for  Computing-  the  Lawful  Money  Reserve  of  National  Banks  in  Reserrt  Citie». 

Items  on  Which  Reserve  is  Required. 

General  Deposits.  | 

Individual  deposits,  viz.: 

Deposits  bubject  to  check, — Demand  and  Time 
ctfs.,  Cashiers  cks.,  Certified  cks.,  &c.     .    .    .   |.. 

Dividends  unpaid $.. 

United  States  Deposits $.. 

Deposits  of  U.  S.  Disbursing  Officers ^ j.... 

Less  Deductions  Allowed. 

Exchanges  for  Clearing  House %.. 

Checks  on  other  banks  in  same  place %.. 

National  Bank  Notes  (other  than  own  issue)  ...%.. 

Net  General  Deposits — 

■Bank  Deposits. 

Due  to  National  Banks $.. 

Due  to  State  Banks  and  Bankers j.. 

Less.  ~ 

Due  from  National  Banks $.. 

Due  from  State  Banks  and  Bankers $., 


Increase  the  remainder  by  one-seventh  of  it  (the  remainder) 

This  gives  the  exact  excess  that  can  be  applied,  viz 

and  is  applied  as  follows  : 
(m.)  If  this  excess  equals  or  is  less  than  the  net  balance  due  banks,*  the  Home  deficiency  can  be 
reduced  by  one-eighth  of  the  excess. 

(«.)  If  the  excess  is  greater  than  the  net  balance  due  banks,'  only  an  amount  of  the  excess  equal 
to  one-eighth  of  this  net  balance  can  be  so  used. 

Itenns  Composing  the  Net  Reserve  and  Distribution  of  the  Same. 


One  half  of  the  Net  Reserve  requiredis 
Items  making  up  the  same  may  consist 
of*  Net  Balances  with  approved  Re- 
serve Agents,  viz : 


'*  Total  net  balance 

t  Excess  with  Reserve  Agents  . 
Deficiency  with  Reserve  Agents 


One-half  of  the  Net  Reserve  required  is 
Items  in  Bank's  possession  to  make  up 
the  same,  viz  : 


Gold  Coin 

Gold  Treasury  Certificates    .    . 
C.H.  Certificates  forCoiaorLegal  Teadars 

Silver  Dollars 

Silver  Treasury  Certificates  .    . 

Fractional  Silver 

Legal-Tender  Notes 

U.  S.  Certificates   of    Deposit 
for  Legal  Tenders 


Excess  in  items  held  by  th;  Bank    . 
Deficiency  in  items  held  by  ihe  Bank 


Excess  in  the  entire  Reserve  held,  $ Deficiency  in  the  entire  Reserve  held,  $ 

*If  reciprocal  accounts  are  kept  with  reserve  agents,  only  the  net  amount  due  iVwm  such  agents  t« 
availab'.o  for  reserve. 

t  Any  excess  with  reserve  agents  can  not  be  coiuited  as  reserve,  and  is  av.iilahle  oniy  to  i-educe  or 
cancel  net  balance  due  to  banks  and  bunkers. 


266 


$.... 
$.... 


$.... 


$ 


$.. 


Fortnfor  Computing  the  Lawful  Money  Reserve  of  A^ationid  Banki  not  in  Reserve  Cities, 

Items  on  Which  Reserve  is  Required. 

General  Deposits. 

Individual  deposits,  viz.: 

Deposits  subject  to  check, — Demand  and  Time 
ctfs.,  Cashiers  cks.,  Certified  cks.,  &c.     . 

Dividends  unpaid 

United  States  Deposits 

Deposits  of  U.  S.  Disbursing  Officers     .    .    . 
Less  Deductions  Allowed. 

Exchanges  for  Clearing  House 

Checks  on  other  banks  in  same  place  .... 

National  Bank  Notes  (other  than  own  issue)  . 

Net  General  Deposits 

Bank  Deposits. 

Due  to  National  Banks 

Due  to  State  Banks  and  Bankers 

Less. 

Due  from  National  Banks 

Due  from  State  Banks  and  Bankers    .... 


'Net  Bank  Deposits  (Net  balance  due  banks  if  any) 

[If  net  balance  is  due  from  banks,  then  there  are  no  bank  deposits  requiring  reserve, 
and  as  such  balance  cannot  offset  any  other  deposits,  omit  it  entirely.] 

The  sum  is  the  total  Deposits  on  which  reserve  is  required,  viz 

Deduct  6|  times  the  five  per  cent,  {sfo)  fund  {i.  e.  the  amount  of  deposits 

covered  by  this  fund  as  reserve) 

^  Net  Deposits  requiring  reserve  is 

15^  of  this  is  the  total  Reserve  required,  viz. 

Proportion  of  Reserve  to  be  in  bank  is  |th,  viz. 

Any  excess  with  Reserve  Agents  above  the  proportion  allowed  to  be  with  them  as 
Reserve,  can  be  counted  as  Auc/rotii  banks,  so  if  the  Home  Reserve  is  short,  and 
there  is  a  balance  due  banks,  the  excess  with  Agents  can  be  used  to  lessen  Reserve 
required.     The  following  are  short  methods  of  applying  it. 

Rule  C. — If  the  excess  is  evidently  considerably  less  than  the  net  bal- 
ance due  banks,  subtract  from  the  net  deposits, '  the  entire  net  balance  with 

Reserve  Agents, '  viz 

T^st  or,  unless  exact  amount  is  needed,  approiimately  s&y  J-  of  the  remiindor 
is  the  Home  Reserve  required,  viz 

Rule  D. — If  the  excess  is  apparently  near  the  amount  of  net  balance 
due  banks,'  from  the  net  balance  due  from  Reserve  Agents,  *  viz 


$.. 


$.... 

$.... 


Subtract  9  %  of  the  net  deposits  requiring  Reserve.  *  viz. 

Increase  the  remainder  by  yg^  or  say  ^j^  of  it     ... 

The  total  is  the  exact  excess  that  can  be  applied,  viz. 

and  is  applied  as  follows  : 

If  this  excess  equals  or  is  less  than  the  net  balance  due  banks,2  six  per  cent,  of  it  can  be  applied 
to  reduce  Home  deficiency,  but  if  the  excfss  is  larger  than  the  net  balance  due  banks,*  only  an 
amount  of  the  excess  equal  to  six  per  cent,  of  said  net  balance  can  be  so  applied. 

Items  Composing  the  Net  Reserve  and  Distribution  of  the  Same. 


Three-fifths  of  the  Net  Reserve  required  is 
items  making  up  the  same  may  consist 
of*  Net  Balances  with  approved  Re- 
serve Agents,  viz : 


»  Total  net  balance 

+  Excess  with  Reserve  Agents   . 
Deficiency  with  Reserve  Agents 


Two  fifths  of  the  Net  Reserve  required  is 
Items  in  Bank's  possession  to  make  up 
the  same,  viz  : 


Gold  Coin 

Gold  Treasury  Certificates    .    . 
C.H.  Certificates  for  Coin  orlegal  Tenders 

Silver  Dollars 

Silver  Treasury  Certificates  .    . 

Fractional  Silver 

Legal-Tender  Notes 

U.  S.   Certificates    of    Deposit 
for  Legal  Tenders 


Excess  in  items  held  by  the  Bank    . 
Deficiency  in  items  held  by  the  Bank 


Excess  in  the  entire  Reserve  held,  $ Deficiency  in  the  entire  Reserve  held,  j 

*  If  reciprocal  accounts  are  kept  with  reserve  agents,  only  the  net  amount  due  from  such  agents  is 
available  for  reserve. 

t  Any  excess  with  reserve  agents  can  not  be  counted  as  reserve,  and  is  available  only  to  reduce  or 
caacel  net  balance  due  to  banks  and  bankers. 


267 


EXAMPLES  OF  COMPUTING  NATIONAL  BANK  RESERVE. 

Examples  illustrating  the  rules  given  for  computing  the  Reserve  required 
to  be  maintained  by  National  banks. 

The  rules  given  for  computing  the  reserve  in  ordinary  cases  are  so  simple 
it  is  thought  no  examples  of  these  are  necessary,  but  illustrations  of  the 
applications  of  the  Short  Methods  of  Computation  in  certain  cases  may  be 
helpful  to  beginners  in  the  National  Banking  System,  therefore,  the  follow- 
ing examples  are  given : 


EXAMPLE  I. 
Illustrating  Rule  j,  page  260. 


Individual  Deposits  .  . 
Dividends  Unpaid  .  . 
U.  S.  Deposits  .... 
Disbursing  Officers,  &c. 


Deduct — 

Exchanges  for  Clearing  House 
Checks  on  local  Banks    .    .    . 
Other  National  Bank  Notes   . 


Due  to  Banks 
Due  from  Banks 


$r,2oo 


75 


000 
no 
000 


12      000 


58 

15 
2 


000 
000 
500 


340 
95 


000 
000 


Less  4  times  5%  (2250) 


Total  net  Deposits 

Subtract — 
Net  balance  with  Reserve  Agents, 


One  seventh  of  remainder       

Is  the  Exact  Reserve  required  to  be  in  Bank — viz  ; 
Total  of  items  (cash,  etc.)  in  Bank  to  Count  as  Reserve 

Excess  in  Bank 

Excess  with  Reserve  Agent 


$1,287 

no 

75 

500 

1,211 

* 

610 

245 

000 

' 

1.456 
9 

610 
000 

1,447 

610 

1 

205 

000 

1 
1 

1,242 

177 

610 
515 

178 

211 

27 

696 
485 

268 


EXAMPLE  2. 

Illustrating  Rule  No.  4, page  261. 


Individual  Deposits  .  . 
Dividends  Unpaid  .  . 
U.  S.  Deposits  .... 
Disbursing  Officers,  etc., 

Deduct — 

ExchangesforCrg  House 
Clieckson  local  Banks 
Other  National  Banks 

Due  to  Banks     .    .    . 
Due  from  Banks    .    . 


$2,400  000 

1220 

150000 

24 


000 


1 16000 

3o|ooo 

sjooo 


680  000 
620 1 000 


52,574 


$«5i 


220 


000 


Total  Deposits 

Deduct  4  times  the  5  %  fund  (4500) 


25  %  of  this  total  net  Deposits     .    . 
Is  the  total  Reserve  required,  viz  : — 
And  amount  required  at  home  ]^    . 


$2,423 


60 


$2,483 
18 


2,465 


220 


000 


220 
000 


220 


If  amount  of  Reserve  at  home  is  short  by  this  estimate, 
as  in  this  case  and  conditions  admit,  the  excess  with  Re- 
serve Agent  may  be  applied. 

Total  of  items  (cash,  etc. )  in  Bank  to  Count  as  Reserve 
Short  on  first  estimate 


Net  balance — 

With  Reserve  Agents 

Amount  with   Reserve  Agents  allowed 
to  Count  as  Reserve 

The  remainder  is  seven  eighths  of  the 

Exact  Excess,  viz : 

Add  one  seventh  of  this 


Exact  Excess  is 


362 

308 

000 

«53 

— 

53 
7 

61 

847 
692 

539 

This  total  being  larger  than  net  balance  due  banks — only  one  eighth 
of  said  balance  can  be  applied  on  Home  Reserve — viz  :    .    .    . 


Changing  the  deficit  to  an  Excess,  of — 


$616 
308 


303 


305 
153 


700 


$    4 


453 


7,500 


3053' 


Rule  B,  m,  would  apply,  if  in  the  above  example  the  balance  due  to  banks  was  a 
larger  amount  than  the  total  excess  with  Reserve  Agents,  then  one  eighth  of  that 
Excess  could  be  used  to  reduce  the  deficiency. 


209 


EXAMPLE  3. 
riusirating  Rule  6,  page  262. 


Individual  Deposits 

Dividends  Unpaid       

U.  S.  Deposits      ... 

Dep.  U,  S.  Disbursing  Officers 

Less — 

Exchange  for  Clearing  House, 
Checks  on  local  Banks  .    . 

Other  National  Bank  Notes  .    . 


Due  to  Banks 

Due  from  Banks 

Total  Deposits 

Less  6yi  times  5%  fund  (2250) 


Total  net  Deposits     .... 
Subtract — 

Net  balance  w^ith  Reserve  Agents 


#360 

000 
150 

! 

1 

1 

1 

10 

3 
2 

000 
000 
500 

000 
000 

! 

1 

80 
10 

360 


150 


151500 


^fSt  or  say  ^-^ih  of  this  remainder 

Is  the  |th  Home  Reserve  required — viz: 

Total  of  items  (cash,  etc.)  in  Bank  to  count  as  Reserve 


344650 

i       I 
70000, 


4i4]650j 

I5[0C30J 

399I650 

45000 


354 
23 
23 


650 
643 
746 

1031 


Approximate  Excess 

(Or  by  taking  exactly  ^st  of  the  $354650,  gives  the  Exact 

Excess — viz:  $363.) 
Three-fifths  added  to  the  above  two-fifths  gives  the  total  minimum  Reserve 
necessary  to  have,  three-fifths  of  which  may  be  with  Reserve  Agents. 


270 


EXAMPLE  4. 
lUiistrating  Rule  7,  page  262. 


Individual  Deposits       l$244iooo 


Dividends  Unpaid 

U.  S.  Deposits 

Department  U.  S.  Disbursing  Officers 

Less — 

Exchanges  for  Clearing  House 
Checks  on  Local  Banks,  .  .  . 
Other  National  Bank  Notes      . 


Due  to  Banks     . 
Due  from  Banks 


430 


000 

2500 

500 


52 


000 


28000 


244 


12 


430 


000 


Total  Deposits      

Deduct  65^  times  5%  fund  (^2,250) 

Total  net  Deposits 


232 
24 

430 

000 

256 
15 

241 

4301 

oooj 

430 

15%  of  this  is  the  total  Reserve  required — viz: 

Amount  required  at  home  6  %  (fths  of  1 5  % ) 

If  ampunt  of  Home  Reserve  by  this  estimate  is  short,  and  con- 
ditions admit,  the  Excess  with  Reserve  Agents  may  be  applied. 


36 
14 


214 
485 


Total  of  items  (cash,  etc.)  in  Bank  to  Count  as  Reserve 
Short  on  first  estimate 


>4 


257 
228 


Net  balance — 

With  Reserve  Agents 

Amount  with  Reserve  Agents  allowed  to 
Count  as  Reserve  9% 

The  remainder  is  ^^^  of  Exact  Excess     . 

[Add  ^fjj  or  say  yi^th  of  this.     For  Exact 

Excess  Y^g'^'^] 


Approximate  total  Excess 

6^  (i.  e.  f  of  15%)  of  this,  is  amount  that  can  be  applied  on  Home 
Reserve 

Making  Home  Reserve  in  Excess  of  requirements 


42 

21 

000 
728 

20 
2 

272 
027 

22 

299 

1337 

i'i09 


+ 


271 


Miscellaneous    Forms. 
Certificate  of  Payment  of  Capital  Stock. 


-,  189—. 


Sir  :  It  is  hereby  certified  that  the installment,  amounting  to 

dollars  ($ ),  has  been  paid  in  on  account  of  the  capital  stock  of  The 

Bank  of ,  making  the  total  amount  paid  in  on  the  capital  stock 


of  this  bank  $ . 

[seal  of  bank.]  ,  Cashier. 

To  the  Comptroller  of  the  Currency. 
State  of , 


County  of  '^  ^"^ ' 

Subscribed  and  sworn  to  before  the  undersigned, of  the  said  county, 

this day  of ,  189 — . 

Resolution  to  Increase  Capital  Stock. 

No. . 

The National Bank  of ,  189 — . 

At  a  meeting  of  the  shareholders  of  the National Bank  of 

-,  held  on ,  189 — ,  thirty  days'  notice  of  the  proposed  business 


having  been  given,  at  which shareholders  were  present  in  person,  and 

by  proxy,  representing shares  of  the  stock  of  this  Association, 

it  was — 

Rt  solved,  That,  under  the  provisions  of  the  Act  of  May  i,  1886,  the  capital 

stock  of  this  association  be  increased  in  the  sum  of  $ ,  making  the  total 

capital  % 

The  above  resolution  was  adopted  by  the  following  vote,  representing  more 
than  two-thirds  of  the  capital  stock  of  the  association  : 


Name. 

Residence. 

No.  of  Shares. 

Total  Number  of  Shares 

I  hereby  certify  that  the  above  is  a  true  and  correct  report  of  the.  vote  and 
of  the  resolution  adopted  at  a  meeting  of  the  shareholders  of  this  bank  held 

<on ,  189 — . 

[seal  of  the  bank.]. .  P>-esidcnt  or  Cashier. 

Subscribed  and  sworn  to  before  me,  this day  of ,  A.  I).  189 — . 

[seal  of  notary.]  ,  Notary  Public. 


272 

Certificate  of  Pavment  of  Increase. 

.  189—, 

To  the  Comptroller  of  the  Currency, 

Washington,  D.  C.  : 

It  is  hereby  certified  that  the  capital  stock  of  "The •  National  bank 

of "  has  been  increased,  pursuant  to  the  provisions  of  the  act  of  May  i, 

1886,  in  the  sum  of dollars,  all  of  which  has  been  paid  in,  and  that  the 

paid  up  capital  stock  of  said  bank  now  amounts  to dollars. 

[bank  seal.]  ,  Cashier. 

I  hereby  certify  that  the  foregoing  certificate,  by  me  subscribed,  is  true. 

,  Cashier.. 

State  of , 


.} 


County  of-  *"  ^^ 

I,  ,  cashier  of  "  The National  Bank  of ,"  in  the  State  of 

,  do  solemnly  swear  that  the  foregoing  certificate  by  me  subscribed  is 


true. 

Subscribed  and  sworn  to  before  me  this day  of ,  189- 


Resolution  to  Reduce  Capital  Stock. 

No. 

The National Bank  of , ,  189 — 

At  a  meeting  of  the  shareholders  of  the National  Bank  of 

-,  held  on ,  189 — ,  thirty  days'  notice  of  the  proposed  business 


having  been  given,  at  which shareholders  were  present  in  person,  and 

by  proxy,  representing shares  of  the  stock  of  this  association, 

it  was — 

Resolved,  That,  under  the  provisions  of  Section  5143,  U.  S.  Revised  Stat- 
utes, and  of  the  law  amendatory  thereof,  the  capital  stock  of  this  association 
be  reduced  in  the  sum  of  $ ,  leaving  the  total  capital  after  said  reduc- 
tion $ . 

The  above  resolution  was  adopted  by  the  following  vote,  representing  more 
than  two-thirds  of  the  capital  stock  of  the  association  : 


Name. 

Residence. 

No.  of  Shares. 

Total  Number  of 

Shares 

I  hereby  certify  that  the  above  is  a  true  and  correct  report  of  the  vote  and 
of  the  resolution  adopted  at  a  meeting  of  the  shareholders  of  this  bank  held 

on  ,  189 — 

[seal  of  bank.]  President  or  Cashier, 

Subscribed  and  sworn  to  before  me,  this day  of ,  A.  D.  1 89 — , 

[seal  of  notary.]  ,  Notary  Public. 


273 

Certificate  ok  Reduction  of  Capital. 

,  189—. 

To  the  Comptroller  of  the  Currency  : 

It  is  hereby  certified  that  the  capital  stock  of  ''  The National  Bank 

of "  has  been  reduced  by  a  vote  of  the  shareholders  owning  two-thirds 

of  the  stock  of  the  association,  in  accordance  with  the  provisions  of  section 
5143  of  the  Revised  Statutes  of  the  United  States,  in  the  sum  of dol- 
lars, and  that  the  paid-up  capital  stock  of  said  bank  since  said  reduction  is 

dollars. 

[bank  seal.]  ,  Cashier. 


State  of 


County  of- 


\  ss  : 


Ij ,  cashier  of  "  The National  Bank  of ,"  in  the  State 

of ,  do  solemnly  swear  that  the  foregoing  certificate,  by  me  subscribed, 

is  true. 

Subscribed  and  sworn  to  before  me  this day  of ,  189 — . 

,  Cashier. 

Application  to  have  City  Designated  a  Reserve  City. 

To  the  Comptroller  of  the  Currency. 

Sir  :  In  accordance  with  the  provisions  of  the  act  approved  March  3,  1887, 
the  National  banks,  whose  corporate  names  are  hereunto  subscribed  by  their 
duly  authorized  officers  or  agents,  do  hereby  make  application  that  the  city 

of ,  in  the  State  of ,  be  added  to  the  cities  named  in  sections 

5191  and  5192  of  the  Revised  Statutes  of  the  United  States,  so  that  balances 
due  from  associations,  approved  by  the  Comptroller  of  the  Currency  located 
in  the  city  of aforesaid,  may,  to  the  extent  authorized  by  law,  be  in- 
cluded in  the  lawful-money  reserve  required  to  be  kept  by  all  National  banks, 
except  banks  in  the  cities  named  in  said  sections  5191  and  5192  of  the  Revised 
Statutes,  and  such  cities  as,  in  pursuance  of  the  said  act  of  March  3,  1887, 
have  been  added  thereto. 

[Applicants  to  sign  as  follows.] 

The  National  Bank  of ,  by ,  President  or  Cashier. 

Authority  of  Officer  to  Sign  Application. 

At  a  meeting  of  the  board  of  directors  of  the bank  of ,  held  at 

their  banking  house ,  189—,  the  following  resolution  was  adopted  : 

Resolved,   That   the  ,  of  this  bank  be,  and  he  is  hereby, 

authorized  to  sign  the  corporate  name  of  the  bank  to  an  application  to  be 
made  to  the  Comptroller  of  the  Currency  that,  in  accordance  with  the  provi- 
sion of  the  act  of  March  3,  1887,  the  city  of  be  added  to  the  cities 

named  in  sections  5191  and  5192  of  the  Revised  Statutes  of  the  United  States. 

I  hereby  certify  that  the  above  is  a  true  extract  from  the  minutes  of  said 


meetmg. 


[seal  of  bank.]  Cashier  and  Sec.  of  the  B' d  of  Directors. 

,  189—. 

]8 


274 

Withdrawal  of  Bonds. 

At  the  meeting  of  the  board  of  directors  of  the Bank  of ,  held 

at  their  banking  house ,  189 — ,  the  following  resolution  was  adopted  : 

Resolved,   That  the  Comptroller  of  the  Currency  be,  and  he  is  hereby, 

authorized  to  withdraw  $ U.  S.  bonds,  deposited  with  the  Treasurer  of  the 

United  States  by  this  bank  to  secure  circulation,  and  described  as  follows : 

$ of  the  loan  of  ,  and  that be,  and  is  hereby  authorized 

to  sell,  assign,  and  transfer  the  same,  and  to  appoint  one  or  more  attorneys 
for  that  purpose. 

I  hereby  certify  that  the  above  is  a  true  extract  from  the  minutes  of  said 

meeting.  — '■ 

[seal  of  bank.]  Cashier  and  Sec.  of  the  B'd  of  Directors. 

Note. — The  Treasurer's  receipts  for  the  bonds  proposed  to  be  withdrawn 
must  be  forwarded  (with  this  form  properly  filled)  to  the  Comptroller  of  the 
Currency. 

Form  of  Proxv  for  Use  at  Stockholders'  Meeting  for  Election  of 

Directors. 

I   do  hereby  constitute   and  appoint  ,  of  ,  in  the  county  of 

and  State  of ,  my  lawful  proxy,  for  me  and  in  my  name  to  vote 

shares  of  the  stock  of  the National  Bank  of ,  owned  by 

me  and  standing  in  my  name  on  the  books  of  said  bank,  at  the  annual  meet- 
ing of  the  stockholders  thereof  to  be  held  for  the  election  of  directors  on  the 

day  of ,  A.  D.  189 — ,  pursuant  to  law,  and  at  all  future  meetings 

of  stockholders  which  shall  be  held  for  a  similar  purpose  until  this  authority 
shall  be  revoked,  hereby  ratifying  and  confirming  whatsoever  the  said  - 

may  lawfully  do  by  virtue  hereof;  and  I  hereby  revoke  and  annul  any  and 
all  authority  heretofore  given  by  me,  authorizing  any  person  for  me,  or  in  my 
name,  to  vote  my  stock  in  said  bank. 

In  witness  whereof  I  have  hereunto  set  my  hand  and  seal  this day 

of ,  A.  D.  189—. 

,  [L.  S.] 

Requirement  of  Directors. 

(Circular  letter  of  Comptroller  of  the  Currency.) 

To  the  President Bank. 

In  order  to  obviate  any  excuse  on  the  part  of  the  directors  of  National 
banks,  based  upon  the  ground  that  they  are  not  and  have  not  been  informed 
of  the  affairs  of  the  banks  with  which  they  are  officially  connected,  and  there- 
fore should  not  be  held  responsible  for  the  same,  all  letters  hereafter 
addressed  to  the  officers  of  banks  bearing  upon  the  report  of  the  Examiner 
are  to  be  submitted  to  the  directors,  and  the  acknowledgment  and  answer 
thereto  made  over  each  director's  individual  signature. 

By  law,  the  duty  of  conducting  the  affairs  of  a  bank  devolves  upon  the 
directors,  and  it  is  desired  that  such  intention  shall  be  made  effective. 

You  will  acknowledge  the  receipt  of  this  letter  and  return  it  with  the  signa- 
tures of  the  directors  attached. 


CHAPTER   III. 


THE  FIVE  PER  CENT.  REDEMPTION  FUND  AND  THE  TRANS- 
PORTATION, REDEMPTION  AND  REISSUE  OF  CURRENCY. 


The  Five  per  cent.  Deposit. — Every  newly-organized  National  bank  is 
required,  immediately  upon  the  receipt  of  its  circulation,  to  deposit  in 
the  Treasury  of  the  U.  S.  a  sum  equal  to  five  per  centum  thereof,  in  lawful 
money  of  the  U.  S.,  "  to  be  held  and  used  for  the  redemption  of  such  circu- 
lation," in  accordance  with  section  3,  Act  of  June  20th,  1874,  par.  156. 

A  similar  deposit  is  required  on  any  additional  circulation  issued  to  Na- 
tional banks  on  a  further  deposit  of  bonds. 

In  estimating  the  circulation  upon  which  the  deposit  is  required,  the  bank 
must  include  all  notes  of  its  issue  in  its  possession,  even  unsigned  as  well  as 
those  in  actual  circulation. 

Keeping  Fund  Intact.— Upon  receipt  of  advices  of  redemption,  banks 
are  required  to  remit  forthwith  to  make  good  their  five  per  cent,  fund, 
without  awaiting  the  receipt  of  the  notes  fit  for  circulation,  or  the  certificate 
of  destruction  of  the  notes  unfit  for  circulation,  as  this  fund  is  required  to  be 
kept  intact  for  further  redemption  of  notes,  and  also  since  it  is  allowed  to  be 
counted  as  reserve. 

Banks  which  have  made  deposits  of  lawful  money  of  the  U.  S.  for  the  re- 
tirement of  a  portion  of  their  circulation,  and  those  whose  notes  have  been 
destroyed  without  reissue,  are  required  to  maintain  the  five  per  cent,  deposit 
only  on  the  remainder.  The  excess  over  the  required  amount  is  surrendered 
immediately  on  receipt  from  the  Comptroller  of  the  Currency  of  advice  of  the 
amount  retired.  Only  reductions  of  circulation  which  are  accompanied  by  a 
release  of  bonds  are  regarded. 

Banks  which  have  resolved  to  go  into  liquidation  must  maintain  the  full 
five  per  cent  deposit,  until  lawful  money  of  the  United  States  is  deposited  for 
the  retirement  of  their  circulation  ;  but  all  of  their  notes  redeemed,  whether 
fit  or  unfit  for  circulation,  are  destroyed.  When  the  deposit  is  made,  the  ex- 
cess of  the  five  per  cent,  fund  over  the  amount  required  to  cover  the  expenses 
of  redemption  and  any  tax  due,  is  surrendered. 

Banks  may  keep  with  the  Treasurer  any  amount  they  choose  in  excess  of 
the  required  five  per  cent,  but  they  are  not  permitted  to  count  such  excess  as 
a  part  of  their  lawful  money  reserve.  It  should  be  entered  on  their  reports 
of  condition,  under  item:  "Due  from  U.  S.  Treasurer  (other  than  five  per 
cent,  redemption  fund.)  " 

Redemptions. — The  redeemed  notes  of  the  several  National  banks  are 

275 


2/6 

assorted,  prepared  for  delivery,  and  charged  to  their  five  per  cent,  accounts, 
and  advices  of  redemption  are  forwarded  to  them,  in  regular  rotation,  follow- 
ing an  alphabetical  arrangement;  and  no  departure  from  this  practice  can 
be  made  for  the  accommodation  of  any  bank. 

If  the  amount  due  does  not  exceed  the  five  per  cent,  deposit  of  the  bank, 
the  notes  fit  for  circulation  are  forwarded  to  it  by  express,  and  the  notes 
unfit  for  circulation  are  delivered  to  the  Comptroller  of  the  Currency,  on  the 
same  day  that  the  advice  of  redemption  is  issued.  If  the  bank's  five  per 
cent,  account  is  overdrawn  by  the  redemption,  a  sufficient  amount  of  the 
notes  to  cover  the  overdraft  is  held  until  it  is  made  good. 

The  law  requires  the  return  of  the  redeemed  notes  fit  for  circulation  to  the 
respective  associations  by  which  they  were  issued,  and  the  dehvery  of  those 
unfit  for  circulation  to  the  Comptroller  of  the  Currency  for  destruction,  and 
no  other  disposition  can  be  made  of  them. 

All  of  the  redeemed  notes  of  banks  which  have  made  a  deposit  of  United 
States  notes  for  the  retirement  of  all  or  a  portion  of  their  circulation  are 
charged  to  that  deposit  until  it  is  exhausted. 

Upon  a  change  in  the  title  of  a  National  bank  all  of  the  redeemed  notes 
issued  under  the  former  title  are  destroyed,  and  the  same  course  is  pursued 
viritli  notes  of  the  old  issue  of  banks  whose  charters  have  been  extended. 

Remittances. — Remittances  for  credit  of  the  five  per  cent,  fund  may  be 
made  in  any  of  the  following  ways  : 

I.  By  a  check  drawn  on  New  York,  payable  to  the  order  of  the  Assistant 
Treasurer  U.  S.  in  N.  Y.,  and  collectible  through  the  clearing-house,  for- 
warded directly  to  that  officer,  with  instructions  to  deposit  the  amount  on  ac- 
count of  the  five  per  cent,  fund,  and  to  forward  the  certificate  of  deposit  there- 
for to  the  Treasurer  U.  S. 

II.  By  a  deposit  of  lawful  money  of  the  U.  S.  with  the  Assistant  Treasurer 
U.  S.  in  Baltimore,  Boston,  Chicago,  Cincinnati,  New  Orleans,  New  York, 
Philadelphia,  St.  Louis  or  San  Francisco,  on  account  of  the  five  per  cent, 
fund.  Banks  not  situated  in  one  of  the  above-named  cities  should  make  the 
deposit  through  their  correspondents.  The  certificate  of  deposit  must  be  for- 
warded directly  to  the  Treasurer  U.  S.  by  the  bank  making  the  deposit,  as 
credit  cannot  be  given  until  it  is  received. 

III.  By  a  remittance  of  lawful  money  of  the  United  States,  addressed  to 
the  Treasurer  U.  S.,  Washington,  D.  C,  marked  with  the  amount  and  nature 
of  the  contents,  and  the  fact  that  it  is  "  for  credit  of  the  five  per  cent,  fund." 
The  express  charges,  if  not  prepaid,  will  be  deducted  from  the  proceeds  of 
the  remittance  at  Government  contract  rates. 

National  bank  depositaries  are  not  authorized  to  receive  deposits  for  credit 
of  the  five  per  cent.  fund. 

Assistant  Treasurers  are  not  authorized  to  receive  remittances  by  express 
on  account  of  the  five  per  cent,  fund;  and  only  the  Assistant  Treasurer  in 
New  York  is  authorized  to  receive  checks  on  that  account. 

It  is  not  necessary  to  advise  the  Treasurer  of  remittances  on  account  of  the 
five  per  cent,  fund,  unless  they  are  made  directly  to  him. 


277 

National  banks  should  make  only  such  deposits  on  account  of  the  five  per 
cent,  fund  as  they  desire  to  have  applied  in  the  redemption  of  their  notes,  or 
in  payment  of  the  expenses  of  redemption. 

Acknowledgments  of  remittances  made  by  one  bank  for  credit  of  the  five 
per  cent,  account  of  another  are  sent  only  to  the  bank  whose  account  is 
credited. 

Ledger  Account. — Banks  should  charge  the  original  five  per  cent,  deposit, 
and  all  subsequent  remittances  for  the  five  per  cent,  fund,  to  an  account 
designated  as  the  "  five  per  cent  redemption  fund,''  and  the  account  should 
be  credited  with  remittances  from  the  Treasury  of  notes  of  the  bank  redeemed 
and  returned  as  fit  fur  circulation  and  also  with  the  amount  of  incomplete 
currency  sent  the  bank  in  lieu  of  notes  redeemed  and  destroyed. 

Banks  are  charged  with  the  full  amount  of  their  notes  unfit  for  circulation 
delivered  to  the  Comptroller,  whether  the  exact  amount  is  re-issued  by  him 
or  not.  Sometimes  the  exact  amount  is  not  sent,  on  account  of  the  rule  of 
the  Department  to  remit  only  full  sheets  of  notes,  i.  e.,  four  notes,  so  if  the 
redemptions  are  of  an  odd  amount,  say,  $510,  the  Department  will  only  send 
250  sheets  of  $5.  notes  or  100  of  plate  lo-io-io  20,  but  the  bank  may  send 
additional  notes  for  redemption,  two  fives  or  four  tens,  which  with  the  $10 
balance  will  entitle  the  bank  to  another  sheet,  thus  making  the  "  five  per  cent, 
fund  "  on  the  bank's  books  correspond  with  the  books  of  the  Treasury  Re- 
demption agency.  Again,  the  remittance  of  new  currency  may  be  short  on 
account  of  the  redemption  of  a  half  note  ;  in  such  case  the  five  per  cent,  fund 
on  the  bank's  books  will  show  the  difference.  If  a  bank  prefers,  it  can  cut 
a  note  and  forward  half  for  redemption  to  add  to  the  credit  of  the  former  half 
redeemed  in  order  to  get  credit  for  a  full  note,  and  carry  the  other  half  of 
note  cut,  in  cash,  until  another  redemption  of  a  half,  when  the  one  held  in 
cash  can  be  sent  on  to  remedy  the  matter  again. 

Assessment  for  Expenses. — The  expenses  incurred  for  "the  charges  for 
transportation  and  the  costs  for  assortin<^'' the  redeemed  notes  of  National 
banks  are  assessed  upon  the  several  banks,  including  those  which  have  made 
deposits  of  lawful  money  for  the  reduction  of  their  circulation  in  proportion 
to  the  amount  of  their  circulation  redeemed,  and  are  charged  to  them  in  their 
five  per  cent,  accounts.  The  assessment  is  made  by  fiscal  years,  and  is 
levied  as  soon  after  the  end  of  each  fiscal  year  (June  30th)  as  the  accounts 
can  be  settled  and  the  computations  made. 

Under  Section  8  of  the  Act  of  July  12th,  1882,  National  banks  making 
deposits  of  lawful  money  for  the  retirement  in  full  of  their  circulation  are 
assessed,  at  the  time  of  their  deposit  for  the  cost  of  transporting  and  redeem- 
ing their  notes  then  outstanding,  a  sum  equal  to  the  average  cost  of  the 
redemption  of  National  bank  notes  during  the  preceding  year.  Any  notes 
which  may  have  been  redeemed  for  their  five  per  cent,  deposits  during  the 
year  then  current  are  included  in  the  assessment. 

Remittance  should  be  made  for  the  amount  of  the  assessment,  immediately 
on  receipt  of  the  notice  thereof,  in  the  same  manner  as  for  notes  redeemed. 


278 

unless  there  is  a  sufficient  excess  to  the  credit  of  the  bank  in  the  five  per  cent, 
fund  to  cover  it. 

Incomplete  Currency. — The  issue  of  new  circulating  notes  to  National 
banks  is  under  the  control  of  the  Comptroller  of  the  Currency,  and  all 
inquiries  and  requests  in  regard  thereto  should  be  addressed  to  him. 

New  currency  is  ordered  to  be  printed  only  on  requisitions  from  the 
banks,  specifying  the  amounts  and  denominations  desired.  Banks  should 
keep  an  account  of  the  amount  of  their  incomplete  currency  in  the  Comp- 
troller's office,  and  should  make  requisitions  on  him  for  the  printing  of  addi- 
tional supplies,  a  sufficient  time  in  advance  of  the  exhaustion  of  those  pre- 
viously ordered,  to  cover  the  time  required  for  the  printing  of  the  new  notes. 

Disposition  of  Notes  Redeemed. — Packages  of  National  bank  notes 
received  for  redemption  at  the  Treasury  Department  are  charged  to,  and 
receipted  for,  by  the  counters,  with  the  seals  unbroken;  and  the  counters  are 
required  to  count,  return,  and  obtain  a  receipt  for,  the  contents  of  each  pack- 
age before  receiving  another.  An  inventory  of  the  contents  according  to 
the  amounts  marked  on  the  straps,  is  made  immediately  on  opening  the 
package,  and  the  contents  of  each  strap  are  separately  proved.  Discrepan- 
cies are  noted  on  the  proper  strap,  which  is  returned  to  the  owner.  '"Shorts" 
are  at  once  reported  and  verified  by  the  teller  in  charge.  The  packages  are 
charged  to  the  counters  by  the  amounts  on  the  wrappers,  and  any  dis- 
crepancy between  these  amounts  and  the  contents  is  reported  as  an  "over'' 
or  a  "  short  "  by  inventory.  The  notes  are  then  assorted  and  examined  by 
experts.  The  currency  fit  for  circulation  is  sent  to  the  several  banks  of  issue, 
and  that  which  is  unfit  for  circulation  is  cancelled  by  cutting  off  the  signa- 
tures of  the  president  and  cashier,  then  done  up  in  sealed  packages  and 
delivered  daily  to  the  Comptroller  of  the  Currency,  who  has  it  examined, 
counted,  and  schedules  made  for  the  banks,  of  what  is  to  be  destroyed  each 
day.  It  is  then  delivered  to  clerks  from  the  office  of  the  Secretary  of  the 
Treasury,  occupying  a  room  for  the  time  being  in  the  Comptroller's  office,  to 
be  examined  and  counted.  After  this  count  the  notes  are  further  cancelled 
by  punching,  and  then  delivered  as  required  by  section  5184  of  the  Bank 
Act,  par.  63,  to  the  agent  of  the  bank  in  the  same  room,  who  examines  and 
counts  them  and  verifies  the  amount.  The  package  is  then  checked  off  from 
the  schedules  in  the  presence  of  four  witnesses,  representing  the  Secretary  of 
the  Treasury,  the  U.  S.  Treasurer,  the  Comptroller  of  the  Currency  and  the 
bank  the  notes  of  which  are  to  be  destroyed.  It  is  then  deposited  in  a 
a  box  and  locked,  then,  accompanied  by  the  witnesses,  taken  to  the  macerator 
and  ground  into  pulp,  and  new  currency  is  sent  the  banks  for  the  same. 
Frequently  notes  are  pronounced  unfit  for  circulation  though  apparently  in 
good  condition,  but  they  are  notes  so  thoroughly  worn,  that  they  would  bear 
but  little  further  use,  and  the  expense  of  new  notes  is  so  very  small  that  it  is 
not  a  consideration. 


CHAPTER   IV. 


TAX  ON  QRCULATING  NOTES. 


By  section  5215,  Revised  Statutes,  it  is  made  the  duty  of  the  Treasurer  of 
the  U.  S.,  to  prescribe  the  form  for  making  return  by  each  National  bank  of 
the  average  amount  of  its  notes  in  circulation  for  each  half  year. 

This  return,  with  each  blank  filled  with  the  proper  amount  as  indicated  and 
subscribed  and  sworn  to  by  the  president  or  cashier  of  the  bank  before  an 
officer  qualified  to  administer  oaths,  must  be  sent  to  the  Treasurer  of  the  U. 
S.  within  ten  days  from  the  first  days  of  January  and  July,  respectively, 
in  each  year,  under  a  penalty  of  two  hundred  dollars,  and  payment  must  be 
made  within  the  months  of  January  and  July. 

Payment  may  be  made  by  deposit  of  the  amount  of  duty  to  the  credit  of 
the  Treasurer  of  the  U.  S.,  with  him,  or  with  any  Assistant  Treasurer  or 
National  Bank  Depositary.  Triplicate  certificates  should  be  issued  therefor, 
the  "  original "  of  which  must  be  forwarded  to  the  Secretary  of  the  Treasury, 
the  "  duplicate  "  to  the  Treasurer,  and  the  "triplicate''  held  by  the  bank 
making  the  deposit  as  its  voucher  therefor.  No  other  receipt  will  be  issued. 
The  certificate  must  state  that  the  deposit  is  on  account  of  semi-annual  duty. 
If  there  is  no  depositary  convenient,  payment  may  be  made  by  draft  on 
New  York  (collectible  through  the  clearing-house),  to  the  order  of  the  Treas- 
urer, or  by  remittance  to  him  in  lawful  money  of  the  U.  S.  or  notes  of  Na- 
tional banks,  for  which  the  Treasurer  will  issue  his  certificate  of  deposit,  and 
send  the  duplicate  to  the  bank.  Drafts  on  other  cities  than  New  York  will 
uot  l)e  accepted. 

The  duty  on  circulating  notes  isone-half  of  one  per  centum  on  the  average 
amount  outstanding  for  the  six  months.  Excepting  that  on  circulation  secured 
by  Consols  of  1930,  it  is  one-fourth  of  one  per  centum. 

Liability  begins  on  the  first  days  of  January  and  July  in  each  year,  unless 
a  bank  had  at  that  time  no  circulation  outstanding,  then  it  begins  with  the 
date  of  the  first  issue  of  notes,  and  terminates  on  the  30th  day  of  June  or  the 
31st  day  of  December  (as  the  case  may  be),  date  of  commencement  and 
termination  both  included. 

Banks  that  have  heretofore  made  returns  will  report  for  the  full  semi-annual 
term  of  181,  182,  or  184  days,  as  the  case  may  be  ;  all  others  will  report  their 
circulation  from  and  including  the  date  of  their  first  issue. 

To  ascertain  the  average  amount,  add  together  the  daily  balances  of 
the  notes  in  circulation  from  the  proper  date  of  liability  to  duty 
(including    for  each    Sunday   and   holiday   the    balance  of   the   first  pre- 

279 


28o 

ceding  business  day)  to  and  including  the  30th  day  of  June  or  the  31st  day  o! 
December,  as  the  case  may  be.  The  aggregate  of  daily  balances  for  the 
first  six  months  of  any  year  will  be  divided  by  181 — the  number  of  days 
from  January  ist  to  June  30th,  except  in  leap  year,  when  the  sum  will  be 
divided  by  182.  The  aggregate  of  daily  balances  for  the  last  six  months  of 
any  year  will  be  divided  by  184 — the  number  of  days  from  July  ist  to  De- 
cember 31st. 

Banks  not  making  daily  statements  and  obtaining  their  averages  from 
weekly  statements,  should  add  together  the  weekly  balances,  including  for 
each  day  in  any  fractional  part  of  a  week  one-seventh  of  the  weekly  balance 
next  preceding  such  fractional  part.  The  aggregate  of  balances  for  the  first 
six  months  of  any  year  will  be  divided  by  the  number  of  weeks  from  Jan- 
uary 1st  to  June  30th  (25f  or  26,  as  the  case  may  be).  The  aggregate  of 
balances  for  the  last  six  months  will  be  divided  by  26f — the  number  of  weeks 
from  July  ist  to  December  31st. 

Banks  having  circulation  subject  to  duty  for  a  period  less  than  a  half  year, 
which  make  their  estimates  from  daily  balances,  will  divide  the  aggregate  of 
the  balances  of  the  item  for  the  time  for  which  it  is  liable  to  duty  by  the 
number  of  days  in  the  half  year ;  and  banks  which  make  their  estimates 
from  weekly  balances,  by  the  number  of  weeks  and  the  fractions  thereof  in 
the  half  year.  The  quotient  thus  found  will  be  the  average  amount  subject 
to  duty  for  each  six  months,  respectively,  and  should  be  entered  in  the 
Return,  and  duty  computed  thereon  at  the  full  semi-annual  rate. 

A  bank  retiring  its  circulation,  or  any  portion  of  it,  is  relieved  from  duty 
on  the  amount  retired  from  the  time  of  making  the  deposit  of  lawful  money 
to  redeem  the  same. 

A  bank  which  has  gone  into  liquidation,  in  making  its  final  return  must 
estimate  duty  upon  circulation  to  the  time  of  making  the  deposit  of  lawful 
money  with  the  Treasurer  of  the  U.  S.  to  redeem  the  same.  The  item  should 
be  average  for  the  full  six  months,  according  to  the  foregoing  rule,  and  the 
duty  calculated  at  the  prescribed  rate.  The  amount  thus  determined  is  the 
correct  proportion  for  the  time  for  which  the  item  is  liable. 


PART    FOURTH. 


CHAPTER   I. 


THE  ISSUE,  REDEMPTION  AND  EXCHANGE  OF  U.  S.  COIN  AND 
PAPER  CURRENCY,  TRANSPORTATION  CHARGES,  ETC 


The  following  regulations  govern  the  issue,  redemption,  and  exchange  of 
the  paper  currency  and  the  gold,  silver,  and  minor  coins  of  the  United  States 
and  the  redemption  of  national  baiik  notes  by  the  Treasurer  of  the  U.  S. : 

I.  Issue  of  United  States  Paper  Currency.. — The  Treasurer  will  forward 
new  U.  S.  notes,  Treasury  notes  of  1890,  or  silver  certificates,  by  express,  at 
the  expense  of  the  consignee,  at  Government  contract  rates,  or  by  registered 
mail,  registration  free,  at  the  risk  of  the  consignee,  in  return  for  such  notes 
or  certificates  unfit  for  circulation,  national  bank  notes,  fractional  silver  coin, 
or  minor  coin,  received  for  redemption. 

Silver  certificates  are  issued  by  the  Treasurer  or  Asst.  Treasurers  upon  a 
deposit  of  standard  silver  dollars. 

II.  Issue  of  Gold  Coin. — Gold  coin  is  issued  in  redemption  of  U.  S.  notes, 
in  sums  not  less  than  $50,  by  the  Asst.  Treas.  in  N.  Y.  and  San  Francisco, 
and  in  redemption  of  Treasury  notes  of  1890,  in  like  sums,  by  the  Treasurer 
and  all  the  Asst.  Treas. 

III.  Issue  of  Standard  Silver  Dollars  and  Fractional  Silver  Coin. — 
Standard  silver  dollars  are  issued  by  the  Treasurer  and  Asst.  Treas.  in 
redemption  of  silver  certificates  and  Treasury  notes  of  1890,  and  are  sent  by 
express,  at  the  expense  of  the  Government,  in  sums  or  multiples  of  ;?5oo,  for 
silver  certificates  or  Treasury  notes  of  1890  deposited  with  the  Treasurer  or 
any  Asst.  Treas. 

Upon  the  deposit  of  an  equivalent  sum  in  U.  S.  Currency  or  national  bank 
notes  with  the  Treasurer  or  any  Asst.  Treas.  or  national  bank  depositary, 
fractional  silver  coin  will  be  paid  in  any  amount  by  the  Treasurer  or  Asst, 
Treas.  in  the  cities  where  their  several  offices  are,  or  will  be  sent  by  express, 
in  sums  of  $200  or  more,  at  the  expense  of  the  Government,  or  by  registered 
mail,  at  the  risk  of  the  consignee,  in  packages  of  $50,  registration  free,  as 
the  depositors  may  request,  from  the  most  convenient  Treasury  office.     For 

281 


282 

this  purpose  drafts  may  be  sent  to  the  Treasurer  or  Asst.  Treas.  in  N.  Y., 
payable  in  their  respective  cities  to  the  order  of  the  officer  to  whom  sent. 
Drafts  on  N.  Y.  City  should  be  sent  direct  to  the  Asst.  Treas.  U.  S.,  New 
York,  and  drawn  to  his  order. 

IV.  Issue  of  Minor  Coin. — The  act  making  appropriations  for  sundry  civil 
expenses  of  the  Government  for  the  fiscal  year  ending  June  30,  1899,  ^^^^' 
tains  a  provision  as  follows : 

The  Secretary  of  the  Treasury  is  authorized  and  directed  to  transport  from 
the  Treasury  or  sub-treasuries,  free  of  charge,  minor  coin  when  requested 
to  do  so :  Provided,  That  an  equal  amount  in  coin  or  currency  shall  have 
been  deposited  in  the  Treasury  or  such  sub-treasuries  by  the  applicant  or 
applicants. 

For  the  purpose  of  carrying  this  enactment  into  effect,  the  following  regu- 
lations are  hereby  promulgated : 

Upon  the  deposit  of  an  equivalent  sum  in  U.  S.  currency  or  national  bank 
notes  with  the  Treasurer  or  any  Asst.  Treas.  or  national  bank  depositary, 
i-cent  bronze  and  5-cent  nickel  pieces  will  be  paid  in  any  amount  by  the 
Treasurer  or  Asst.  Treas.  in  the  cities  where  their  several  offices  are,  or  will 
be  sent  by  express,  in  sums  of  $20  or  more,  at  the  expense  of  the  Govern- 
ment, or  by  registered  mail,  in  like  sums,  at  the  risk  of  the  consignee,  regis- 
tration free,  as  the  depositors  may  request  from  the  most  convenient  Treas- 
ury office.  For  this  purpose  drafts  may  be  sent  to  the  Treasurer  or  the  Asst. 
Treas.  in  N.  Y.,  payable  in  their  respective  cities  to  the  order  of  the  officer  to 
whom  sent.  Drafts  on  N.  Y.  City  should  be  drawn  to  the  order  of  the  Asst. 
Treas.  of  the  U.  S.,  New  York,  and  sent  directly  to  him. 

The  Treasurer  and  Asst.  Treas.  will  pay  out  for  lawful  money  any  minor 
coin  not  needed  in  the  current  business  of  their  offices,  but  in  no  case  should 
drafts  be  sent  to  them  or  for  it, 

V.  Issue  of  the  Treasurer's  Transfer  Checks. — Subject  to  the  convenience 
of  the  Treasury,  and  provided  that  the  express  charges  on  remittances  have 
been  prepaid,  the  Treasurer  will  issue  transfer  checks  on  the  Asst.  Treas., 
payable  to  the  order  of  the  sender  or  his  correspondent,  for  U.  S.  notes  and 
Treasury  notes  of  1890  unfit  for  circulation  or  national  bank  notes  sent  to  the 
Treasurer  for  redemption,  or  for  fractional  silver  coin  or  minor  coin  sent  in 
multiples  of  $20  to  the  Treasurer  or  an  Asst.  Treas. 

VI.  Redemption  of  Paper  Currency. — U.  S.  notes,  fractional  currency 
notes,  gold  certificates,  silver  certificates,  and  Treasury  notes  of  1890,  are 
redeemable  by  the  Treasurer,  and  when  not  mutilated  so  that  less  than 
three-fifths  of  the  original  proportions  remains,  by  the  several  Asst.  Treas., 
at  face  value.  U.  S.  notes  are  redeemable  in  coin,  in  sums  not  less  than  $50. 
by  the  Asst.  Treas.  in  N.  Y.  and  San  Francisco.  Treasury  notes  of  1890  are 
redeemable  in  coin,  in  sums  not  less  than  $50,  by  the  Treasurer  and  all  the 
Asst.  Treas.  Silver  certificates  are  redeemable  in  standard  silver  dollars 
only,  or  exchangeable  for  other  silver  certificates.  National  bank  notes  are 
redeemable  in  lawful  money  of  the  U.  S.  by  the  Treasurer,  but  not  by  the 
Asst.  Treas. 


283 


U.  S.  notes,  fractional  currency  notes,  gold  certificates,  silver  certificates, 
Treasury  notes  of  1890,  and  N.  B.  notes,  when  mutilated  so  that  less  than  three- 
fifths,  but  clearly  more  than  two-fifths,  of  the  original  proportions  remains, 
are  redeemable  by  the  Treasurer  only,  at  one-half  the  face  value  of  the  whole 
nole  or  certificate.  Fragments  not  clearly  more  than  two-fifths  are  not 
redeemed,  unless  accompanied  by  the  evidence  required  in  the  following 
paragraph. 

Fragments  less  than  three- fifths  are  redeemed  at  the  face  value  of  the 
whole  note  when  accompanied  by  an  affidavit  of  the  owner  or  other  persons 
having  knowledge  of  the  facts  that  the  missing  portions  have  been  totally 
destroyed.  The  affidavit  must  state  the  cause  and  manner  of  the  mutilation, 
and  must  be  sworn  and  subscribed  to  before  an  officer  qualified  to  administer 
oaths,  who  must  affix  his  official  seal  thereto,  and  the  character  of  the  affiant 
must  be  certified  to  be  good  by  such  officer  or  some  other  having  an  official 
seal.  Signatures  by  mark  [  X  ]  must  be  witnessed  by  two  persons  who  can 
write,  and  who  must  give  their  places  of  residence.  The  Treasurer  will 
exercise  such  discretion  under  this  regulation  as  may  seem  to  him  needful  to 
protect  the  U.  S.  from  fraud.  Fragments  not  redeemable  are  rejected  and 
returned. 

VII.  Returns  for  Paper  Currency. — For  remittances  received  under  the  U. 
S.  Government  contract : 

For  remittances  from  a  place  where  there  is  no  sub-treasury,  returns  will 
be  made  in  new  U.  S.  paper  currency  by  express,  at  the  expense  of  the  con- 
signee, at  U.  S.  contract  rates;  or  in  fractional  silver  coin,  at  the  expense  of 
the  U.  S.  for  transportation,  in  sums  or  multiples  of  $200. 

For  remittances  from  a  place  where  tliere  is  a  sub-treasury,  returns  will  be 
made  in  new  U,  S.  paper  currency  by  express,  at  the  expense  of  the  con- 
signee, at  U.  S.  contract  rates;  or,  subject  to  the  convenience  of  the  Treas- 
ury, in  the  Treasurer's  transfer  checks  on  the  sub-treasury  in  the  place  from 
whence  the  remittance  is  received. 

No  exchange  for  remittances  of  currency  to  the  Treasurer  for  redemption 
under  the  U.  S.  contract  will  be  furnished  either  by  transfer  checks  or  ship- 
ments of  currency. 

VIII.  Redemption  or  Exchange  of  Silver  and  Minor  Coin. — Fractional 
silver  coin  and  coins  of  copper,  bronze,  or  copper-nickel  may  be  presented 
in  sums  or  m.ultiples  of  Jg20,  assorted  by  d('no)ninaiio7is  iti  separate  packages, 
to  the  Treasurer  or  an  Asst.  Treas.  for  redemption  or  exchange  into  lawful 
money,  and  standard  silver  dollars  for  exchange  into  silver  certificates 
only.     When  forwarded  by  express,  the  charges  should  be  prepaid. 

Depositors  of  fractional  silver  coin  will  obtain  quicker  returns  and  aid  the 
Department  in  retiring  the  old  issues  from  circulation,  if  tliey  will  present 
coins  of  the  old  designs  and  the  new  in  separate  packages. 

No  foreign,  mutilated,  or  defaced  silver  coin  or  coins  to  which  paper  or 
any  other  substance  has  been  attached  as  an  advertisement  or  for  any  other 
purpose,  will  be  received.  Reductions  by  natural  abrasion  is  not  considered 
mutilation. 


284 

Minor  coin  that  is  so  defaced  as  not  to  be  readily  identified,  or  that  is 
punched  or  clipped,  will  not  be  redeemed  or  exchanged.  Pieces  that  are 
stamped,  bent,  or  tv/isted  out  of  shape,  or  otherwise  imperfect,  but  showing 
no  material  loss  of  metal,  will  be  redeemed. 

IX.  Transmission  to  the  Treasurer. — U.  S.  notes,  gold  certificates,  silver 
certificates.  Treasury  notes  of  1890,  and  National  bank  notes  should  be  sent 
in  separate  remittances.  The  notes  should  be  assorted  by  denominations 
and  inclosed  in  paper  straps,  not  more  than  100  notes  to  each  strap,  and  the 
straps  should  be  marked  with  the  amount  of  their  contents.  Not  more  than 
8,000  notes  should  be  put  in  one  package. 

An  inventory,  giving  the  amount  of  each  denomination  of  notes,  the  total 
amount  in  the  package,  the  address  of  the  party  sending,  and  the  disposition 
to  be  made  of  the  proceeds,  should  be  enclosed  with  each  package,  and  a 
letter  of  advice  sent  by  mail. 

The  package,  if  it  be  sent  by  express,  should  be  sealed  up  in  stout  paper 
and  addressed  to  the  ''  Treasurer  of  the  United  States,  Washington,  D.  C." 
The  wrapper  should  be  plainly  marked  with  the  owner's  name  and  address, 
the  amount  and  kind  of  currency  enclosed,  and,  if  the  sender  desires  the 
benefit  of  the  Government  contract,  with  the  words  "  under  Government  con- 
tract with  the  United  States  Express  Company  from  the  nearest  point  of 
transfer." 

It  is  the  duty  of  postmasters  to  register  free  of  charge  all  letters  on  which 
the  postage  has  been  fully  prepaid,  addressed  to  the  Treasurer,  containing 
currency  of  the  U.  S.  for  redemption.  It  is  recommended  that  all  such  let- 
ters be  registered  as  a  protection  against  loss. 

Remittances  of  money  by  mail  should  be  addressed  to  the  "  Treasurer  of 
the  United  States,  Washington,  D.  C."  Such  remittances  and  returns  there- 
for by  mail  are  invariably  at  the  risk  of  the  owners.  All  communications  to 
the  Treasurer  in  regard  to  packages  lost  in  the  mail  are  referred  for  investi- 
gation to  the  Chief  Post-Office  Inspector,  Post-Office  Department,  Washing- 
ton, D.  C,  to  whom  any  subsequent  inquiry  on  the  subject  should  be 
addressed. 

X.  Express  Charges. — The  Government  contract  with  the  United  States 
Express  Company  for  the  transportation  of  moneys  and  securities  extends 
to  all  points  accessible  through  established  express  lines  reached  by  continu- 
ous railway  communication,  in  all  the  States  and  Territories  of  the  U.  S., 
excepting  Alaska,  Arizona,  California,  Idaho,  Nevada,  New  Mexico,  Oregon, 
Utah,  and  Washington,  but  does  not  embrace  sea,  river,  or  stage  transporta- 
tion of  any  kind.     [See  provision  for  sending  by  registered  mail,  page  286.] 

The  contract  rates  for  the  transportation  of  all  kinds  of  paper  currency  to 
or  from  Washington  are  : 

Between  Washington  and  points  in  the  territory  of  the  United  States  Ex- 
press Company  and  reached  by  it,  20  cents  per  |i,ooo  or  fractional  part 
thereof  over  $500;  sums  of  ^500  or  fractional  part  thereof,  10  cents. 

Between  Washington  and  points  in  the  territory  of  another  express  com- 
pany, excepting  points  in  Texas,  Arkansas,  Colorado,  Kansas,  Nebraska, 


285 

Montana,  North  Dakota,  South  Dakota,  Wyoming  and  the  Indian  and  Okla- 
homa Territories,  60  cents  per  $1,000  or  fractional  part  thereof  over  $500; 
sums  of  ^500  or  fractional  part  thereof,  40  cents. 

Between  Washington  and  points  in  Colorado,  Kansas  and  Nebraska,  75 
cents  per  $1,000  or  fractional  part  thereof  over  $500;  sums  of  $500  or  frac- 
tional part  thereof,  50  cents. 

Between  Washington  and  points  in  Texas,  Arkansas,  Montana.  Norih 
Dakota,  South  Dakota,  Wyoming  and  the  Indian  and  Oklahoma  Territories, 
$1  per  $1,000  or  fractional  part  thereof  over  $500;  sums  of  $500  or  fractional 
part  thereof,  65  cents. 

Express  charges  are  paid  by  the  Government,  at  contracted  rates,  on  stand- 
ard silver  dollars  sent  by  the  Treasurer  or  Asst.  Treas.  in  sums  or  multiples 
of  $500,  on  fractional  silver  coin  in  sums  of  $200  or  more,  and  on  minor  coin 
sent  from  the  mint  at  Philadelphia  in  sums  or  multiples  of  $20,  and  on  Na- 
tional bank  notes  sent  to  the  Treasurer  for  redemption  in  sums  or  multiples 
of  $500. 

On  U.  S.  notes,  gold  certificates,  silver  certificates,  Treasury  notes  of  1890, 
sent  for  redemption,  on  any  kind  of  lawful  money  sent  for  credit  of  the  5  per 
cent,  redemption  fund,  and  on  National  bank  notes  sent  for  redemption  in 
other  amounts  than  multiples  of  $500,  the  charges,  if  not  prepaid,  are  de- 
ducted from  the  proceeds  at  contract  rates. 

On  U.  S.  notes,  gold  certificates,  silver  certificates,  or  Treasury  notes  of 
1890,  returned  for  United  States  currency  or  National  bank  notes  redeemed, 
the  charges  are  deducted  at  contract  rates. 

On  standard  silver  dollars,  fractional  silver  coin,  and  minor  coin,  sent  for 
exchange  or  redemption  the  charges  must  be  prepaid  by  the  sender. 

On  transfers  of  funds  from  National  bank  depositaries,  under  letters  of  in- 
struction, the  charges  must  be  paid  by  the  depositaries. 

Express  charges  cannot  be  prepaid  at  Government  contract  rates.  The 
Treasurer  has  no  control  over  rates  exacted  when  the  charges  are  prepaid,  or 
for  transportation  outside  of  the  territorial  limits  of  the  contract. 

No  charge  is  made  for  the  amount  of  express  charges  inclosed  with  a  re- 
mittance when  separately  noted  on  the  wrapper.  Packages  should  always  be 
marked  with  the  exact  amount  of  the  contents. 

XI.  General  Information. — Paper  currency  presented  for  redemption  or 
exchange  or  for  credit  of  tlie  Treasurer  at  the  offices  of  the  Asst.  Treas.  must 
be  assorted  by  kinds  and  denominations,  and  inclosed  in  paper  straps,  the 
straps  not  to  contain  more  than  100  notes  each,  and  to  be  plainly  marked 
with  the  amount  of  the  contents. 

The  act  of  June  30,  1876  (19  Statutes,  64),  requires  "  that  all  U.  S.  officers 
charged  with  the  receipt  or  disbursement  of  public  moneys,  and  all  officers 
of  National  banks,  shall  stamp  or  write  in  plain  letters  the  word  '  counterfeit,' 
•altered,'  or  '  worthless'  upon  all  fraudulent  notes  issued  in  the  form  of  and 
intended  to  circulate  as  money  which  shall  be  presented  at  their  places  of 
business;  and  if  such  oflScers  shall  wrongfully  stamp  any  genuine  note  of  the 


286 

U.  S.  or  of  the  National  banks,  they  shall,  upon  presentation,  redeem  such 
notes  at  the  face  value  thereof." 

Counterfeit  notes  or  coins  found  in  remittances  to  this  office  are  returned 
to  the  sender  canceled  for  the  purpose  of  enabhng  him  to  make  reclamation 
and  after  such  use  they  must  be  returned  to  this  office  for  transfer  to  the 
Secret-Service  Division  of  the  Treasury  Department. 

In  case  of  the  loss  or  destruction  of  one  of  the  Treasurer's  checks,  and 
upon  application  for  a  duplicate,  payment  of  the  original  check  is  stopped, 
and  the  applicant  is  furnished  with  a  form  of  bond  of  indemnity,  upon  the 
return  of  which,  properly  executed,  a  duplicate  is  issued. 

Compliance  with  the  foregoing  regulations  is  enjoined  on  all  officers  of  the 
Department,  and  observance  of  them  will  be  expected  of  all  making  remit- 
tances. 

Provision  for  Sending  Incomplete  Currency  from  Wash- 
ington by  Registered  Mail,  Insured. — The  Comptroller  of  the 
Currency  will  accept  a  power  of  attorney  from  National  banks  to 
deliver  their  new  currency  to  an  agent,  thus  authorized,  to  send 
to  the  banks  by  registered  mail.  We  have  made  arrangements 
with  a  reliable  insurance  company  to  insure  such  shipments,  and  it 
is  found  less  expensive  than  by  express  to  many  banks  oflF  the  line 
of  the  express  company  which  has  the  Government  contract  for 
transportation  of  moneys.  We  will  furnish  estimate  of  expense 
and  blank  power  of  attorney  on  application. 

A,  S.  Pratt  &  Sons. 


CHAPTER   11. 


MISCELLANEOUS  REGULATIONS. 


Coupons  Bonds.— Coupon  bonds  of  the  United  States  are  payable  to 
bearer,  and  pass  by  delivery,  without  endorsement.  They  are  convertible 
into  registered  bonds  of  the  same  loan,  but  the  law  does  not  authorize  the 
conversion  of  registered  into  coupon  bonds. 

Coupon  bonds  forwarded  to  the  Department  for  exchange  into  registered 
bonds  should  be  addressed  to  the  Secretary  of  the  Treasury,  Division  of 
Loans  and  Currency. 

There  is  no  expense  attending  the  exchange  at  the  Department ;  but  when 
bonds  are  sent  by  express  the  charges  must  be  paid  by  the  party  transmitting 
them. 

Form  of  Letter  for  Conversion  of  Coupon  Bonds  into  Registered 

Bonds. 

, , ,  18-. 

Hon.  Secretary  of  the  Treasury, 

Was  king  ioTi,  D.  C. 

Sir:  Herewith  I  send  % U.  S.  coupon  bonds  of  the  Act  of  July  14th, 

1870,  per  cent,  loan  on ;  which  please  excliange  into  registered 

bonds  in  the  name  of . 

Please  send  the  new  bonds  to  the  subscribed  address. 

Mail  checks  for  the  interest  to , . . 


Very  respectfully, 


Registered  Bonds. — Registered  bonds  of  the  United  States  differ  from 
coupon  bonds  in  the  following  respects,  namely:  (i)  They  have  inscribed  or 
expressed  upon  their  face  the  names  of  the  parties  who  own  them,  denomi- 
nated/aj)/<?<?-y/  (2)  they  are  payable  only  to  such  payees  or  their  assigns;  and 
(3)  the  property  or  ownership  in  them  can  be  transferred  only  by  assignment 
For  the  purpose  of  assigning  them,  there  are  forms  printed  on  the  backs  of 
the  bonds,  together  with  directions  to  be  followed  in  the  execution  of  such 
assignments. 

A  ledger  account  is  opened  in  the  Department  with  each  holder  of  one  or 
more  registered  bonds ;  and  in  this  account  each  bond  is  fully  described.  All 
recognized  transfers  must  be  made  upon  the  loan  books  in  the  office  of  the 
Register  of  the  Treasury. 

Assignment  of  Bonds. — The  directions  printed  on  the  backs  of  the  bonds 
should  be  carefully  followed  in  the  execution  of  assignments,  and  the  name  of 
the  assignee  should  be  written  plainly  in  the  space  left  for  that  purpose.  As- 
signments insist  be  dated  and  properly  acknowledged. 

287 


288 

If  a  bond  is  to  be  divided  among  two  or  more  parties,  their  names  and  the 
amount  to  each  should  be  stated  in  the  assignment.  If  only  a  part  of  a  bond 
is  assigned,  a  new  issue  for  the  remainder  will  be  made  to  the  former  payee 
of  the  whole  bond :  Privided,  however,  That  the  amount  assigned  shall  cor- 
respond with  one  or  more  of  the  denominations  in  which  the  bonds  are  issued. 

Registered  bonds  should  not  be  assigned  in  blank,  as  such  assignment 
would  make  them  payable  to  bearer  and  render  them  available  to  any  holder 
thereof ;  in  other  words,  under  an  assignment  in  blank  the  title  to  the  bonds 
would  pass  by  delivery. 

A  detached  assignment  should  never  be  resorted  to.  except  when  the  blank 
form  for  an  assignment  which  is  printed  on  the  bond  shall  have  been  already 
used ;  and  in  this  case  only  when  there  shall  not  be  suflBcient  space  on  the 
back  of  the  bond  for  another  assignment.  The  payee  should  sign  his  name 
to  the  assignment  as  the  name  is  written  on  the  face  of  the  bond.  If  the  bond 
be  issued  to  a  firm,  the  assignment  must  be  subscribed  in  the  name  of  the 
firm  by  a  member  thereof  who  shall  be  possessed  of  authority  to  sign  for  the 
firm,  of  which  authority  the  ofl&cer  witnessing  the  signature  must  be  satisfied ; 
if  issued  to  joint  owners,  co-trustees,  executors,  administrators,  or  guardians, 
each  person  must  sign  for  himself ;  if  to  a  corporation  or  company,  the  offi- 
cial character  of  the  person  executing  the  assignment,  and  the  authority  of 
such  person  to  dispose  of  the  bond  or  bonds  in  question,  should  be  duly  veri- 
fied by  vote  or  resolution  of  the  board  of  directors  of  the  corporation  or 
company,  certified  under  its  seal.  Where  such  officer  is  authorized  by  virtue  of 
his  office  to  execute  the  assignment,  a  certificate,  under  seal,  of  this  fact  and 
of  his  election  to  the  office,  and  that  he  stills  holds  and  exercises  such  office, 
must  be  furnished  together  with  a  certified  copy  of  the  charter  or  by-laws  of 
such  corporation  or  company,  showing  the  authority  claimed  thereunder. 

All  such  evidence  of  authority  will  be  placed  on  file  in  the  Department, 
and,  if  general  and  permanent  in  its  character,  need  not  be  reproduced  in  sub- 
sequent transactions  under  the  same  power,  if  proper  reference  be  made 
thereto. 

Assignments  by  Representatives  and  Successors. — In  case  of  death  or  suc- 
cessorship,  the  representative  of  the  deceased  person,  or  the  successor,  must 
furnish  official  evidence  of  such  decease  or  successorship,  and  of  his  own 
appointment,  authority,  or  power.  An  executor  or  administrator  may  assign 
bonds  standing  in  the  name  of  the  deceased  person  in  whose  stead  such 
executor  or  administrator  shall  be  acting.  Where  there  are  two  or  more 
legal  representatives,  all  must  unite  in  the  assignment,  unless  by  a  decree  of 
court  or  testamentary  provision  some  one  or  more  of  them  is  or  are  desig- 
nated and  empowered  to  dispose  of  the  bonds.  If  the  bonds  had  been  held 
by  the  deceased  in  the  capacity  of  a  fiduciary  or  trustee,  a  court  having  juris- 
diction must  appoint  a  successor,  who  should  execute  the  assignment  in  order 
to  secure  the  transfer  or  payment  of  the  bonds. 

An  executor,  administrator,  trustee,  guardian,  or  attorney  cannot  assign 
bonds  to  himself,  unless  he  be  specially  authorized  to  do  so  by  a  court  pos- 
sessing jurisdiction  of  the  matter. 

Foreign  Successorship  Assignments. — Where  a  payee,  at  the  time  of  his 
death,  was  a  resident  of  a  foreign  country,  the  party  claiming  to  direct  and 


289 

execute  the  transfer  must  furnish  an  exempHfied  copy  of  the  will  or  other 
instrument  conveying  the  requisite  authority,  duly  certified  under  the  hand 
and  seal  of  the  proper  officer,  attested  by  the-  certificate  of  a  United  States 
minister,  charg^,  consul,  vice-consul,  or  commercial  agent,  or,  if  there  be 
none  such  accessible,  (which  fact  shall,  in  such  case,  be  certified,)  by  that  of 
a  notary  public,  to  the  effect  that  such  exemplified  copy  is  executed  and 
granted  by  the  proper  tribunal  or  officer,  and  is,  in  due  form  and  according  to 
the  laws  of  that  country.  The  assignment  should  be  executed  as  hereinbefore 
directed. 

Assignments  by  Attorney. — Persons  entitled  to  assign  bonds  may  appoint 
for  that  purpose  an  attorney,  who,  by  virtue  of  the  authority  so  conferred, 
can  execute  the  assignment  in  the  same  manner  as  provided  for  the  con- 
stituent. 

No  officer  of  the  Treasury  of  the  U.  S.  should  be  selected  as  such  attorney. 

Powers  of  attorney  authorizing  the  assignment  of  bonds  should  be  sent,  for 
record,  to  the  Register  of  the  TreasurJ^ 

Form  of  Power  of  Attorney. 

Know  all  men  by  these  presents  . 

That  I, ,  do  hereby  appoint my  attorney  to  assign 

any  and  all  United  States  bonds  now  standing  {or  7vhich  may  hereafter  stand) 
in  my  name  on  the  books  of  the  Treasury  Department,  granting  to  said 
attorney  full  power  to  appoint  one  or  more  substitutes  for  that  puqiose, 
hereby  ratifying  and  confirming  all  that  may  be  lawfully  done  by  virtue  hereof. 

Witness  my  hand  and  seal  this  the day  of ,  A.D.  18—. 

.     [seal.] 

Executed  before  me  this  the day  of ,  A.D.  18 — . 


[Official  seal.]  ,  . 

Note. — To  be  verified  in  accordance  with  instructions  contained  on  page 
228,  under  head  of  acknowledgments. 

Form  of  Authority  by  Resolution. 

At  a  regular  meeting  of  the  board  of  directors  of  the , 

of , ,  held ,  18 — ,  it  was,  on  motion, 

^'Resolved,  That  A.  B. ,  president,  and  C  D.,  cashier,  are,  or  either  of  them 
is,  hereby  authorized  and  empowered  to  assign  any  and  all  United  States 
bonds  now  standing  {or  which  -may  hereafter  stand)  in  the  name  of  this  bank 
[or  institution]." 

I  certify  that  the  above  is  a  true  copy  from  the  minutes. 


[Corporate  seal.]  Secretary  of  the  Board. 

Note. — This  resolution  should  be  certified  by  some  officer  of  the  institu- 
tion other  than  the  one  emp>owered  to  assign  the  bonds. 

19 


290 

It  is  recommended  that  resolutions  be  adopted  only  at  regular  meetings. 
But  when  passed  at  a  special  meeting,  the  certificate  may  be  as  follows : 

We  certify  that  at  a  special  meeting  of  the  board  of  directors  of ,  duly 

held  at ,  on  the day  of ,  at  —  o'clock  —  M.,  i8 — ,  the  fore- 
going resolution  was  adopted,  and  is  now  in  full  force. 

And  we  certify  that  notice  was  duly  given,  personally,  to  all  the  members 
of  the  said  board  of  directors  of  the  time  and  place  of  said  meeting,  and  of 

the  object  thereof,  for  more  than days  prior  thereto,  and  in  time  to 

enable  all  to  attend  said  meeting ;  and  that  at  such  meeting  so  held  a  quorum 
of  all  the  members  of  said  board  was  present  and  voted  for  the  adoption  of 
said  resolution. 

Form  of  Authority  under  By-laws. 

At  the  annual  meeting  of  the  stockholders  of  the ,  of 

-,  held  ,  18—, was  duly  elected  president, 


and was  duly  elected  cashier ;  and  as  such  they  are  jointly  or 

severally  empowered  by  the  by-laws  (a  certified  copy  of  which  is  hereto 
annexed)  to  sell  and  assign  any  and  all  United  States  bonds  now  standing  {or 
which  may  hereafter  stand)  in  the  name  of  this  bank  \_or  institution]. 

.  Secretary. 

[Seal  of  bank  or  institution.] 

Acknowledgments  of  assignments,  when  not  made  at  this  Department, 
must  be  made  either  before  an  Assistant  Treasurer  of  the  U.  S.,  a  U.  S.  judge 
or  district  attorney,  clerk  of  a  U.  S.  court,  collector  of  customs  or  internal 
revenue,  or  president  or  cashier  of  a  National  bank.  The  witnessing  officer 
should  append  his  official  title  and  affix  his  seal  of  office,  if  he  have  one ;  if  he 
have  no  seal  of  office,  he  should  certify  such  to  be  the  fact.  The  president  or 
cashier  of  a  National  bank  must  append  the  title  and  affix  the  seal  of  the 
bank.     The  impress  of  the  seal  must  in  every  case  be  made  upon  the  bond. 

Foreign  Acknowledgments  may  be  made  before  a  United  States  minister, 
chargd,  consul,  vice-consul,  or  commercial  agent.  A  notary  public,  or  other 
competent  officer,  in  a  foreign  country  may  take  acknowledgments ;  but  his 
official  character  and  jurisdiction  must  be  properly  verified.  (See  under  head 
"Foreign  successorship  assignments.")  The  official  seal,  where  there  is  one, 
should  in  all  cases  be  affixed,  as  per  foregoing  direction  ;  and  where  there  is 
none  this  fact  should  be  made  known  and  attested. 

Execution  of  Powers. — Powers  of  attorney  for  the  transfer  of  bonds  must 
be  acknowledged  in  the  presence  of  some  one  of  the  officers  authorized  to 
take  acknowledgments  of  assignments ;  and  where  such  officer  has  an  official 
seal,  it  must  be  affixed  ;  where  he  has  none  he  should  so  state. 

Powers  of  Substitution  must  be  executed  and  acknowledged  in  the  same 
manner  as  powers  of  attorney,  and  should  likewise  follow  the  same  general 
form. 

Transmission  of  Bonds. — When  registered  bonds  are  properly  assigned, 
they  should  be  transmitted  to  the  Register  of  tiie  Treasury  for  reissue,  and 
should  be  accompanied  by  a  letter  of  explicit  instructions,  stating  tiie  amount 


291 

enclosed,  the  loan  to  which  the  bonds  belong,  the  denominations  of  the  bonds 
desired  in  exchange  therefor,  the  name  and  residence  of  each  assignee,  and 
the  post  office  address  to  which  it  is  desired  the  interest  checks  shall  be 
mailed. 

When  bonds  of  different  loans  are  forwarded  in  one  remittance,  a  separate 
letter  of  instructions  should  accompany  the  bonds  of  each  loan. 

When  coupon  and  registered  bonds  are  transmitted  at  the  same  time,  the 
former  should  be  sent  to  the  Secretary  of  the  Treasury,  and  the  latter  to  the 
Register  of  the  Treasury. 

Form  of  Letter  Transmitting  Registered  Bonds  for  Transfer. 

Register  of  the  Treasury. 

Sir  :  Herewith  you  will  receive  $ U.  S.  registered  bonds  of  the 

per  cent,  loan  of  ,  which  please  transfer,  per  as  assignment,  to 

of , . 

Please  send  the  new  bonds  to  the  subscribed  address. 

Mail  checks  for  the  interest  to , . 


Very  respectfully, 


New  Bonds. — Registered  bonds  received  for  transfer  are  cancelled,  and 
new  bonds  in  their  stead  are  issued  in  the  name  of  the  assignee.  These  bear 
interest  from  the  first  day  of  the  quarter  or  half  year  (as  their  interest  term 
may  run)  in  which  the  transfer  shall  have  been  made.  As  a  rule,  returns  are 
made  on  the  same  day  that  the  bonds  are  received,  and  made  invariably  by 
registered  mail  unless  otherwise  instructed.  When  bonds  are  sent  or 
returned  by  express  the  entire  expense  thus  incurred  must  be  borne  by  the 
party  desiring  the  transfer. 

No  Fees  will  be  charged  by  a  United  States  minister,  charg^,  consul,  vice- 
consul,  or  commercial  agent  for  witnessing  and  certifying  an  assignment  of, 
or  power  to  assign,  bonds,  or  collect  interest  thereon.  No  charge  is  made 
by  the  Department  for  transferring  registered  bonds. 

Interest  on  Registered  Bonds. — Interest  on  registered  bonds  of  the  above- 
described  loans  is  paid  by  check  which  is  sent  by  mail ;  when  address  is  not 
known  checks  will  be  held  by  the  Treasurer  until  called  for  by  the  payees 
thereof 

The  checks  are  payable,  when  properly  indorsed,  on  presentation  at  the  U. 
S.  Treasury  or  at  the  office  of  any  Assistant  Treasurer  of  the  U.  S. 

Holders  of  these  bonds  should  notify  the  Register  of  the  Treasury  of  any 
change  in  their  post-office  address  at  least  fifteen  days  before  the  interest  falls 
due ;  and  in  case  of  the  appointment  of  an  attorney  to  indorse  the  interest 
checks,  notice  of  this  fact  should  likewise  be  given  to  the  Register.  Such 
holders  should  also  transmit  to  the  Auditor  of  the  Treasury  all  powers  of 
attorney  authorizing  the  indorsement  of  interest  checks,  and  advise  him 
specifically,  at  which  of  the  offices  referred  to  above  it  is  desired  that  the 
interest  checks,  under  such  powers,  shall  be  paid. 

Closing  of  Transfer  Books.— For  the  purpose  of  preparing  the  interest 
schedules,  the  transfer  books  are  closed  during  tlie  month  immediately  pre- 
ceding the  date  of  payment  of  the  interest. 


292 

If  bonds  forwarded  for  transfer  be  not  received  prior  to  or  upon  the  day 
fixed  for  closing  the  transfer  books,  the  transfer  will  not  be  effected  until  after 
the  reopening  of  the  books  ;  and  consequently  the  interest  for  that  quarter  or 
half  year  (as  the  interest  term  may  be)  will  be  declared  in  favor  of  the  parties 
whose  names  appear  upon  the  face  of  the  old  bonds,  and  to  them  the  assign- 
ees must  look  for  any  interest  claimed. 

Form  of  Power  of  Attorney  to  Collect  Interest  Checks. 

Know  all  men  by  these  presents,  that of ,  do  appoint 

attorney  to  receive  from  the  proper  officer  and  to  indorse 


checks  for  interest  *  in  name  on  the  books  of  the  Treasury  Depart- 
ment of  the  United  States  ;  granting  to  said  attorney  power  to  appoint  one  or 
more  substitutes  for  the  purpose  herein  expressed  ;  hereby  ratifying  and  con- 
firming all  that  may  lawfully  be  done  by  virtue  hereof. 

Witness hand-  and  seal-  this day  of ,  18—. 

.     [L.  S.] 

.     [L.S.] 


Signed,  sealed  and  acknowledged  in  the  presence  of— 


(To  be  acknowledged  as  directed  below.) 

Execution  of  Powers  of  Attorney  to  Indorse  Interest  Checks. — Powers  of 
attorney  must  be  acknowledged  either  before  the  Treasurer  or  an  Asst.  Treas. 
of  the  U.  S.,  a  U.  S.  judge,  U.  S.  district  attorney,  clerk  of  the  U.  S.  court, 
collector  of  customs,  collector  of  internal  revenue,  president  or  cashier  of  a 
National  bank,  or  a  notary  public.  If  in  a  foreign  country,  powers  must  be 
acknowledged  either  before  a  U.  S.  minister,  charge,  consul,  vice-consul, 
commercial  agent,  or  notary  public.  If  before  the  latter,  his  official  character 
and  the  genuineness  of  his  signature  must  be  properly  verified. 

The  acknowledging  officer  must  add  his  official  designation,  residence  and 
seal,  if  he  have  one;  if  he  have  no  seal  of  office,  he  should  certify  such  to  be 
the  fact. 

Powers  of  attorney  and  testamentary  evidence  designed  as  authority  to  col- 
lect interest  checks  should  be  filed  with  the  Auditor  of  the  Treasury. 

Form  of  Authority  by  Resolution  for  the  Indorsement  of  Inter- 
est Checks. 

At  a  regular  meeting  of ,  held  at ,  in  the  State  of ,  on  thg 

day  of ,  18 — ,  a  quorum  being  present,  it  was,  on  mption, 


Resolved,  That be,  and  is  hereby,  authorized  to  receipt  for 

and  to  indorse  checks  for  interest  due,  or  to  become  due,  on  all  United  States 

bonds  registered  in  the  name  of on  the  books  of  the  Treasury 

Department,  with  power  to  appoint  one  or  more  substitutes  for  the  purpose 

*  When  intended  to  be  special,  insert  [due  on  the day  of ,  18— 

on  all  bonds  standing  in .]     When  general,  insert  [now  due  and  which 

may  hereafter  accrue  on  all  bonds  standing,  or  which  may  hereafter  stand,  in 


293 

herein  expressed,   until  such  authority  is  officially  revoked,  and  notice  of 
revocation  is  properly  given  to  the  Treasury  Department. 

A  true  copy  of  the  minutes. 

(Signed.)  ,  President. 

[seal,]     Attest:  ,  Secretary. 

Note. — Where  the  society  or  institution  has  no  seal,  it  will  be  requisite  to 
acknowledge  the  instrument  before  a  notarj'  or  some  other  competent  officer 
having  an  official  seal.  If  the  president,  cashier,  secretary,  or  treasurer  be 
authorized  to  indorse  the  checks,  the  instrument  must  be  certified  by  an  officer 
other  than  the  one  empowered  to  make  the  indorsement. 

The  Auditor  of  the  Treasury  should  be  advised  where  interest  checks 
indorsed  by  attorneys  will  be  presented  for  payment. 

Interest  to  Joint  Holders  of  Registered  Bonds. — Interest  will  be  paid  to 
any  one  of  several  joint  holders,  or  co-trustees,  executors,  administrators,  or 
guardians;  but  in  the  execution  to  a  third  party  of  a  power  to  collect  interest 
checks  all  must  join.  In  case  of  the  death  of  any  such  joint  holders,  co-trustees, 
&c.,  the  survivor  or  survivors  will  be  recognized  as  having  full  authority,  upon 
due  proof  of  such  death  and  survivorship. 

Payment  of  Interest  on  U.  S.  R.  Bonds  in  Name  of  Minors. — When  Gov- 
ernment bonds  are  registered  in  the  names  of  infants,  checks  issued  in  pay- 
ment of  interest  thereon  will  be  paid  only  to  the  proper  guardian  of  such 
infants,  when  the  Secretary  of  the  Treasury  has  been  notified  of  such  infancy. 

Neither  the  father  nor  mother  of  an  infant  has  the  right,  as  a  general  rule, 
to  indorse  or  collect  such  checks. 

The  guardian  of  an  infant,  in  order  to  indorse  and  collect  interest  checks  in 
favor  of  his  ward,  js  required  to  file  with  the  Auditor  of  the  Treasury  evidence 
(i)  of  guardianship,  (2)  of  his  authority  being  in  force,  and  (3)  of  the  identity 
of  his  ward  as  the  payee  in  the  bonds. 

The  Government  is  not  liable  to  refund  to  an  infant,  on  his  arriving  at  the 
age  of  majority,  money  paid  to  him  on  his  indorsement  of  checks  during  mi- 
nority, when  the  Secretary  of  the  Treasury  had  not  been  notified  of  the  fact 
of  infancy.     (Department  Circular  No.  6,  dated  February  7th,  1881.) 

Unclaimed  Interest. — The  interest  on  registered  bonds  which  has  been 
returned  to  the  Treasury  as  unclaimed,  can  be  collected  only  in  person  or  by 
attorney  at  the  U.  S.  Treasury. 

For  the  convenience  of  the  public,  and  to  save  charges,  powers  to  collect 
specified  unclaimed  interest  may  be  made  in  favor  of  the  Chief  of  the  Division 
of  Loans  and  Currency  of  the  Secretary's  office. 

Translations.— Powers  of  attorney,  and  all  other  legal  documents  executed 
in  the  United  States,  must  be  in  the  English  language.  If  executed  abroad 
in  any  other  language,  such  powers  must  be  accompanied  by  an  accurate 
translation  into  English,  and  by  a  sworn  certificate  of  the  person  who  made 
such  translation,  properly  acknowledged  before  a  notary  public  or  other  com- 
petent officer  having  a  seal,  to  the  effect  that  the  translation  is  correct  and 
complete. 

Lost  Registered  Bonds. — In  case  of  the  loss  of  registered  bonds,  the  Secre- 
tary of  the  Treasury  should  be  promptly  notified,  in  order  that  a  caveat 


294 

may  be  entered  against  the  transfer  of  the  missing  bonds,  on  the  books  of 
the  Department. 

Form  of  Request  for  Caveat. 

Secretary  of  the  Treasury. 

Sir  :  The  registered  bonds  described  below,  standing  in  my  name,  were 

stolen  from  the  undersigned  on  or  about  the of last.    Please  enter 

a  caveat  against  their  transfer  : 

No. ,  for  I ,  Act  of ,  i8 — , per  cent.,  and  No. ,  for 

% ,  Act  of ,  i8 — , per  cent. 

Very  respectfully,  , 


Lost  Coupon  Bonds,  Notes  and  Coupons. — In  consequence  of  the  increas- 
ing trouble,  wholly  without  practical  benefit,  arising  from  notices  which  are 
constantly  received  at  the  Department,  respecting  the  loss  of  coupon  bonds, 
which  are  payable  to  bearer,  and  of  Treasury  notes  issued  and  remaining  in 
blank  at  the  time  of  loss,  it  becomes  necessary  to  give  this  public  notice,  that 
the  Government  cannot  protect,  and  will  not  undertake  to  protect,  the  owners 
of  such  bonds  and  notes  against  the  consequences  of  their  own  fault  or  mis- 
fortune. 

Hereafter  all  bonds,  notes,  and  coupons,  payable  to  bearer,  and  Treasury 
notes  issued  and  remaining  in  blank,  will  be  paid  to  the  party  presenting 
them  in  pursuance  of  the  regulation  of  the  Department,  in  the  course  of  regu- 
lar business  ;  and  no  attention  will  be  paid  to  caveats  which  may  be  filed  for 
the  purpose  of  preventing  such  payment.  (Department  Circular  of  April  27, 
1867.) 

Duplicates  for  Destroyed  or  Defaced  Bonds. — Section  3702. — Whenever  it 
appears  to  the  Secretary  of  the  Treasury,  by  clear  and  unequivocal  proof,  that 
any  interest-bearing  bond  of  the  U.  S.  has,  without  bad  faith  upon  the  part  of 
the  owner,  been  destroyed,  wholly  or  in  part,  or  so  defaced  as  to  impair  its  value 
to  the  owner,  and  such  bond  is  identified  by  number  and  description,  the 
Secretary  shall,  under  such  regulations  and  with  such  restrictions  as  to  time 
and  retention  for  security  or  otherwise  as  he  may  prescribe,  issue  a  duplicate 
thereof,  having  the  same  time  to  run,  bearing  like  interest  as  the  bond  so 
proved  to  have  been  destroyed  or  defaced,  and  so  marked  as  to  show  the 
original  number  of  the  bond  destroyed  and  the  date  thereof.  But  when  such 
destroyed  or  defaced  bonds  appear  to  have  been  of  such  a  class  or  series  as 
has  been  or  may,  before  sucii  application,  be  called  in  for  redemption,  instead 
of  issuing  duplicates  thereof,  they  shall  be  paid,  with  such  interest  only  as 
would  have  been  paid  if  they  had  been  presented  in  accordance  with  such  call. 

Section  3703. — The  owner  of  such  destroyed  or  defaced  bond  shall  sur- 
render the  same,  or  so  much  thereof  as  may  remain,  and  shall  file  in  the 
Treasury'  a  bond  in  a  penal  sum  of  double  the  amount  of  the  destroyed  or 
defaced  bond,  and  the  interest  which  would  accrue  thereon  until  the  principal 
becomes  due  and  payable,  witli  two  good  and  sufficient  sureties,  residents  of 
the  U.  S.,  to  be  approved  by  the  Secretary,  with  condition  to  indemnify  and 
save  harmless  the  U.  S.  from  any  <:laim  upon  such  destroyed  or  defaced  bond. 


295 

Duplicates  for  Lost  Registered  Bonds. — Section  3704. — Whenever  it  is 
proved  to  the  Secretary  of  the  Treasury,  by  clear  and  satisfactory  evidence, 
that  any  duly  registered  bond  of  the  U.  S.,  bearing  interest,  issued  for  valua- 
ble consideration  in  pursuance  of  law,  has  been  lost  or  destroyed,  so  that  the 
same  is  not  held  by  any  person  as  his  own  property,  the  Secretary  shall  issue 
a  duplicate  of  such  registered  bond,  of  like  amount,  and  bearing  like  interest 
and  marked  in  the  like  manner  as  the  bond  so  proved  to  be  lost  or  destroyed. 

Section  3705. — The  owner  of  such  missing  bond  shall  first  file  in  the 
Treasury  a  bond  in  the  penal  sum  equal  to  the  amount  of  such  missing  bond, 
and  the  interest  which  would  accrue  thereon,  until  the  principal  thereof 
becomes  due  and  payable,  with  two  good  and  sufficient  sureties,  residents  of 
the  U.  S.,  to  be  approved  by  the  Secretary,  with  condition  to  indemnify  and 
save  harmless  the  U.  S.  from  any  claim  because  of  the  lost  or  destroyed  bond. 

Parties  presenting  claims  on  account  of  a  coupon  or  registered  bond  of  the 
U.  S.  which  has  been  destroyed  wholly,  or  in  part,  or  on  account  of  a  regis- 
tered bond  which  has  been  lost,  will  be  required  to  present  evidence  showing  : 

1.  The  number,  denomination,  date  of  authorizing  act,  and  rate  of  interest 
of  such  bond  ;  whether  coupon  or  registered  ;  and,  if  registered,  the  name  of 
the  payee.  In  the  case  of  a  registered  bond,  it  should  also  be  stated  whether 
it  had  been  assigned  or  not  previous  to,  or  since,  the  alleged  loss  or  destruc- 
tion, and,  if  assigned,  by  whom,  and  whether  assigned  in  blank  or  to  some 
person  specifically  by  name ;  and  if  assigned  in  the  latter  manner  the  name  of 
the  assignee  should  be  given. 

2.  The  time  and  place  of  purchase,  of  whom  purchased,  and  the  considera- 
tion paid. 

3.  The  place  of  deposit  of  the  missing  bond  ;  whether  or  not  any  person  or 
persons,  other  than  the  owner,  had  access  thereto ;  and  in  the  event  of  its 
having  been  accessible  to  other  parties,  their  afl&davits,  in  addition  to  that  of 
the  owner,  should  be  furnished,  showing  their  knowledge  of  the  existence  of 
the  bond,  and  of  the  fact  of  its  loss  or  destruction. 

4.  The  material  facts  and  circumstances  connected  with  the  loss  or  destruc- 
tion of  the  bond. 

5.  It  should  be  shown  by  the  affidavits  of  credible  persons,  if  practicable  by 
U.  S.  oiBcers,  that  the  statements  of  the  claimant  as  set  forth  in  his  affidavit 
are  worthy  of  the  confidence  of  the  Department,  and  that  he  is  the  identical 
person  named  in  the  application. 

In  all  cases  the  evidence  should  be  as  full  and  clear  as  possible,  that  there 
may  be  no  doubt  of  the  good  faith  of  the  claimant.  Proofs  may  be  made  by 
affidavits  duly  authenticated,  and  by  such  other  competent  evidence  as  may 
be  in  the  possession  of  the  claimant. 

General  Form  of  Affidavit. 
\  ss : 


Personally  appeared  before  me,  a  notary  public  in  and  for  the  city  of 


county  of and  State  of ,  the  subscriber, ,  who,  being 

duly  sworn  according  to  law,  deposes  and  says  that is  the  lawful  owner 

of  the  following  described  registered  bonds  of  the  United  States,  viz. : 


296 
No. ,  fori ,  Act  of ,  18 — , per  cent.,  and  No. 


r 


for  $ ,  Act  of -,  18—, per  cent.,  registered  in name 

on  the  books  of  tlie  Treasury  Department, ,  18 —  ;  that  no  assignment 

or  transfer  of  said  bonds  [or  either  of  them]  has  been  made  by or 

attorney,  either  in  blank  or  by  a  specific  assignment,  or  in  any  manner  what- 
ever ;  that  said  bonds  have  not,  nor  has  either  of  them,  by  hypothecation, 

pledge,  loan,  or  otherwise,  passed  from  the  custody  or  control  of  said 

with  [his  or  her]  knowledge  or  consent ;  that  the  said  bonds  were  stolen  from 

,  the  said ,  at ,  on  the  ,  by  some  person  or 

persons  unknown  to ;  and  that  due  diligence  has  been  exercised  in 

endeavoring  to  recover  the  said  bonds,  without  success.     [State  what  has 
been  done.] 

Sworn  to  and  subscribed  before  me  this  the day  of ,  A.D.,  18 — . 

And  I  certify  that  said is  personally  well  known  to  me  to  be  the 

identical  person  mentioned  in  the  foregoing  affidavit. 

[notarial  SEAL.]  . 

Notary  Public. 

Affidavits  and  other  evidence  pertaining  to  the  claim  should  be  transmitted 
to  the  Secretary  of  the  Treasury.  The  applicant  will  be  advised  of  the 
decision  as  soon  as  it  is  reached.  If  it  be  favorable  to  such  applicant,  a  blank 
indemnity  bond  will  be  forwarded  to  him  for  execution  ;  and  when  this 
indemnity  bond  shall  have  been  duly  executed,  returned'  to  the  Department, 
and  approved,  the  relief  desired  will  be  granted. 

A  duplicate  in  lieu  of  a  lost  registered  bond  will  not  be  issued  within  six 
months  from  the  time  of  the  alleged  loss. 

The  interest  on  an  uncalled  registered  bond  will  be  paid  to  the  payee 
thereof  even  though  the  bond  has  been  lost  or  destroyed. 

Under  a  decision  of  the  Attorney-General  of  the  U.  S.  of  January  29th, 
1878,  the  Secretary  of  the  Treasury  cannot  give  relief  in  cases  where  coupons 
previously  detached  from  the  bonds  have  been  destroyed.  The  decision 
makes  a  distinction  between  coupons  destroyed  when  still  attached  to  the 
bond  and  those  detached  and  afterwards  destroyed.  In  the  former  case  it 
would  amount  to  a  partial  destruction  or  defacement  of  the  bonds  themselves ; 
in  the  latter,  the  coupons  form  no  part  of  the  bonds,  but  are  then  the  basis  for 
independent  claims,  possessing  all  the  essential  attributes  of  commercial 
paper.  That  is,  a  claimant  for  relief  for  a  coupon  destroyed  while  still 
attached  to  bond  can  get  it  from  the  Secretary  of  the  Treasury,  under  the 
provisions  of  Section  3702 ;  but  if  destroyed  after  detachment,  the  claimant 
must  present  his  claim  in  the  usual  manner,  and  await  action  of  Congress. 

Called  Bonds. — All  U.  S.  called  bonds  forwarded  for  redemption  should  be 
addressed  to  the  Secretary  of  the  Treasury,  Division  of  Loans  and  Currency. 
When  registered  bonds  are  so  forwarded  they  should  be  assigned  to  • '  the 
Secretary  of  the  Treasury  for  redemption."  Assignments  must  be  dated  and 
properly  acknowledged,  as  prescribed  in  the  note  printed  on  the  back  of 
each  bond. 

Where  checks  in  payment  of  registered  bonds  are  desired  in  favor  of  any 


297 

one  but  the  payee,  the  bonds  should  be  assigned  to  the  "  Secretary  of  the 
Treasuiy  for  redemption  for  account  of "-  (here  insert  the  name  of  the  person 
or  persons  to  whose  order  the  check  should  l)e  made  payal)le.) 

Regulations  in  regard  to  Coupons  Detached  from  Called  Bonds. — When 
coupons  detached  from  bonds  that  have  been  called  in  for  redemption  are 
presented  for  payment,  the  Department  will  pay  such  portion  of  the  interest 
specified  in  such  coupons  as  had  accrued  at  the  day  fixed  in  the  call  for  the 
redemption  of  the  bonds,  and  no  more,  unless  the  party  presenting  them 
claims  payment  of  their  nominal  value,  in  which  case  the  Department  will 
retain  the  coupons  until  the  bonds  from  which  they  were  detached  shall  have 
been  presented  and  the  conflicting  claims  adjusted. 

When  a  called  bond  is  presented  for  redemption  from  which  a  coupon, 
maturing  after  the  day  fixed  in  the  call  for  such  redemption,  shall  have  been 
detached,  the  nominal  value  of  such  coupon  shall  be  deducted  from  the  sum 
due  upon  the  bond,  unless  the  coupon  shall  have  been  paid  as  above;  the 
sum  thus  deducted  to  be  retained  to  await  the  presentation  of  the  coupon  and 
a  settlement. 

All  correspondence  in  relation  to  bonds  that  have  been  called  in  for  redemp- 
tion, or  coupons  belonging  thereto,  should  be  addressed  to  the  "  Loan 
Division,"  Secretary's  Office. 

Exemption  of  United  States  Bonds  from  Taxation.—  Section  3701  of  the 
Revised  Statutes  provides  as  follows:  "All  stocks,  bonds.  Treasury  notes, 
and  other  obligations  of  the  United  States  shall  be  exempt  from  taxation  by 
or  under  State  or  municipal  or  local  authority."  This  section  makes  the 
exemption  from  taxation  binding  only  upon  "State  or  municipal  or  local 
authority;"  but,  according  to  the  express  terms  of  the  Act  of  Congress  of 
July  14th,  1870,  the  bonds  and  the  interest  thereon  of  the  funded  loans  which 
are  thereby  authorized — namely,  the  loan  of  1881,  the  loan  of  1891,  and  the 
four-percent,  consols  of  1907 — "  shall  be  exempt  from  the  payment  of  all 
taxes  or  duties  of  the  United  States,  as  well  as  from  ta.xation  in  any  form  by 
or  under  State,  municipal,  or  local  authority ;  and  the  said  bonds  shall  have 
set  forth  and  expressed  upon  their  face  the  above  specified  conditions."  (See 
also  Section  5219,  Revised  Statutes  ) 

BONDS  OF  THE   UNITED  STATES. 

Interest  Bearing. — Funded  Loan  of  1891,  Act  July  14,  1S70,  and  January  20, 
1871,  continued  2  per  cent.,  payable  at  pleasure  of  U.  S, 

Consols  of  1907:  Act  July  14,  1870,  and  January  20,  1871,  4  percent.,  pay- 
able July  I,  1907. 

Loan  of  1904  :  Act  January  14,  1875,  5  P^r  cent.,  payable  February  i,  1904. 

Loan  of  1925:  Act  January  14,  1875,  4  per  cent.,  payable  February  r,  1925. 

Ten-twenties  of  1898:  June  13,  1898,  |2oo,ooo,ooo,  3  per  cent.,  payable 
after  August  1,  1908. 

Bonds  that  have  Matured  and  Ceased  to  Bear  Interest. — Loan  of  1858: 
June  14,  1858,  5  per  cent.,  payable  15  years  from  January  i,  1859. 

Fives  of  i860:  June  22,  i860,  5  per  cent.,  payable  10  years  from  January  i, 
1861. 

Sixes  of  1880  :  February  8,  i86i,  6  per  cent.,  payable  December  31,  1880. 


298 

Oregon  War  Loan  :  March  2,  1861,  6  per  cent.,  payable  20  years  from  July 
I,  1861. 

Sixes  of  1881 :  July  17  and  August  5,  1861,  6  per  cent.,  payable  June  30, 1881. 

Five-Twenties  of  1862:  February  25,  1862,  6  per  cent.,  payable  after  5  and 
within  20  years  from  May  i,  1862. 

Sixes  of  1881 :  March  3,  1863,  6  per  cent.,  payable  June  30,  1881. 

Five-twenties  of  1864:  March  3,  1864,  6  per  cent.,  payable  after  5  and  within 
20  years  from  November  i,  1864 

Ten-forties:  March  3,  1864,  5  per  cent.,  payable  after  10  and  within  40  years 
from  March  i,  1864. 

Five-twenties  of  1864:  June  30,  1864,  6  per  cent.,  payable  after  5  and  within 
20  years  from  November  i,  1864. 

Five-twenties  of  1865  :  March  3,  1865,6  per  cent. ,  payable  after  5  and  within 
20  years  from  November  i,  1865. 

Consols  of  1865:  March  3,  1865,  6  per  cent.,  payable  after  5  and  within  20 
years  from  July  i,  1865. 

Consols  of  1867:  March  3,  1865,6  per  cent.,  payable  after  5  and  within  20 
years  from  July  i,  1867. 

Consols  of  1868 :  March  3,  1865,  6  per  cent.,  payable  after  5  and  within  20 
years  from  July  i,  1868. 

Funded  Loan  of  1881 :  July  14,  1870,  and  January  20,  1871,  5  per  cent.,  pay- 
able after  May  i,  1881. 

Sixes  of  1881 :  July  17,  and  August  5,  1861  (continued  April  11,  1881),  3^^ 
per  cent,  payable  at  pleasure  of  U.  S. 

Sixes  of  1881 :  March  3,  1863  (continued  April  11,  1881),  2^4  per  cent.,  paya- 
ble at  pleasure  of  U.  S. 

Funded  Loan  of  1881:  July  14,  1870,  and  January  20,  1871  (continued  May 
12,  1881),  35^  per  cent.,  payable  at  pleasure  of  U.  S. 

Funded  Loan  of  1882 :  July  12, 1882,  3  per  cent.,  payable  at  pleasure  of  U.  S 

Funded  Loan  of  1891 :  July  14,  1870,  and  January  20,  1871,  4)4  per  cent., 
continuc-d  at  2  per  cent.,  payable  at  pleasure  of  U.  S. 

Currency  Sixes  Pacific  R.  R.  :  July  r,  1862,  and  July  2,  1864  (issued  1865- 
1869),  6  per  cent.,  payable  in  30  years. 

INDORSEMENT  OF  TREASURY   DRAFTS. 

The  name  of  the  payee,  as  indorsed,  must  correspond  in  spelling  with  that 
on  the  face  of  the  draft ;  no  guarantee  of  an  indorsement,  imperfect  in  itself, 
can  be  accepted.  If  the  name  of  a  payee,  as  written  on  the  face  of  a  draft,  is 
spelled  incorrectly,  the  draft  should  be  returned  to  the  Treasurer  of  U.  S.  for 
correction. 

Indorsements  by  mark  (X)  must  be  witnessed  by  two  persons  who  can 
write,  giving  their  places  of  residence. 

Indorsements  by  executors,  administrators,  guardians,  or  other  fiduciaries 
must  be  accompanied  by  certified  copies,  under  seal,  of  letters  testamentary, 
letters  of  administration,  of  guardianship,  or  other  evidence  of  fiduciary  char- 
acter, as  the  case  may  be. 

Payees  and  indorsees  must  indorse  by  their  own  hands  ;  officials,  officially 
with  full  title  ;  firms,  the  usual  firm-signature  by  a  member  of  the  firm,  not  by 
a  clerk  or  other  person  for  the  firm. 


299 

Every  indorsement  must  be  by  the  proper  written  (not  printed)  signature 
of  the  person  whose  indorsement  is  required. 

Powers  of  attorney  for  the  indorsement  of  drafts  in  payment  of  claims  must 
state  the  number,  date  and  amount  of  draft,  and  number  and  kind  of  warrant, 
and  be  dated  subsequently  to  the  date  of  the  drafts  ;  must  be  witnessed  by  two 
persons,  and  must  be  acknowledged  by  the  constituent  before  the  Treasurer 
of  the  U.  S.  or  an  Asst.  Treas.,  a  judge  or  clerk  of  a  District  Court  of  the 
U.  S.,  a  collector  of  customs,  a  notary  public  under  his  seal,  or  a  justice  of  tlie 
peace  in  those  States  only  in  which  such  justice  has  authority  to  take  acknowl- 
edgments of  deeds,  or  commissioner  of  deeds ;  if  before  either  of  the  two 
latter,  the  certificate  and  seal  of  the  county  clerk  as  to  the  ofiScial  character 
and  signature  of  the  justice  or  commissioner  is  required. 

If  executed  in  a  foreign  country,  the  acknowledgment  must  be  made 
before  a  notary  public  with  his  seal  attached,  or  a  U.  S.  Consul  or  Minister. 
The  officer  taking  the  acknowledgment  must  certify  that  the  letter  of  attorney 
was  read  and  fully  explained  to  the  constituents  at  the  time  of  acknowledg- 
ment, and  that  said  constituent  is  personally  well  known  to  him  to  be  the 
identical  person  named  in  and  who  subscribed  his  name  to  said  power  of 
attorney.     (See  Revised  Statutes,  sections  1778  and  3477.) 

Evidence  of  authority  to  indorse  for  incorporated  or  unincorporated  com- 
panies must  accompany  drafts  drawn  or  indorsed  to  the  order  of  such  com- 
panies or  associations.  Such  evidence  should  be  in  the  form  of  an  extract 
from  the  by-laws  or  records  of  the  company  or  association,  showing  the 
authority  of  the  officer  to  indorse  and  receive  and  receipt  for  moneys  for  the 
company,  and  giving  his  name  and  the  date  of  his  election  or  appointment, 
which  extract  must  be  verified  by  a  certificate  under  seal  signed  by  the  presi- 
dent and  secretary,  or  by  one  of  these  officers  and  not  less  than  two  of  the 
directors  ;  which  certificate  must  state  that  such  authority  remains  unrevoked 
and  unchanged.  If  the  company  have  no  seal,  the  extract  should  be  certified 
as  correct  by  a  notary  public  or  other  competent  officer  under  his  seal.  When 
a  resolution  is  adopted  at  a  special  meeting  of  directors,  it  must  be  shown 
that  all  had  notice  of  the  time  and  place  of  such  meeting,  and  that  a  quorum 
assented  to  the  resolution. 

In  cases  where  an  individual  or  a  copartnership  is  doing  business  under  a 
company  title,  the  affidavit  of  the  owner  or  of  the  members  of  the  copartner 
ship  will  be  required,  showing  the  fact  of  ownership  and  naming  the  person 
who  is  authorized  to  indorse  and  receive  and  receipt  for  moneys  for  the 
owners. 

The  indorsement  of  all  the  joint  holders  or  co-trustees,  executors,  adminis- 
trators, guardians  or  other  fiduciaries  will  be  required  on  drafts,  and  in  the 
execution  of  a  power  to  a  third  party  to  collect,  all  must  join.  In  case  of 
death  of  either,  the  survivors  will  be  recognized  as  having  full  authority  upon 
due  proof  of  such  death  and  survivorship.  ■• 


30O 

'■'•  WAR  REVENUE  LAW. 

(Extracts  from  Act  approved  June  13,  1898,) 

Bankers. — Bankers  using  or  employing  a  capital  not  exceeding  the  sum  of 
twenty-five  thousand  dollars  shall  pay  fifty  dollars  ;  when  using  or  employing 
a  capital  exceeding  twenty-five  thousand  dollars,  for  every  additional  thousand 
dollars  in  excess  of  twenty-five  thousand  dollars,  two  dollars,  and  in  estimat- 
ing capital  surplus  shall  be  included.  The  amount  of  such  annual  tax  shall 
in  all  cases  be  computed  on  the  basis  of  the  capital  and  surplus  for  the  preced- 
ing fiscal  year.  Every  person,  firm  or  company,  and  every  incorporated  or  other 
bank,  having  a  place  of  business  where  credits  are  opened  by  the  deposit  or 
collection  of  money  or  currency,  subject  to  be  paid  or  remitted  upon  draft, 
check,  or  order,  or  where  money  is  advanced  or  loaned  on  stocks,  bonds, 
bullion,  bills  of  exchange  or  promissory  notes,  or  where  stocks,  bonds, 
bullion,  bills  of  exchange,  or  promissory  notes,  arereceived  for  discount  or  sale, 
shall  be  a  banker  under  this  Act :  Provided  That  any  savings  bank  having  no 
capital  stock,  and  whose  business  is  confined  to  receiving  deposits  and  loaning 
or  investing  the  same  for  the  benefit  of  its  depositors,  and  which  does  no 
other  business  of  banking,  shall  not  be  subject  to  this  tax. 

********* 

Checks,  Drafts,  Etc. — Bank  check,  draft  or  certificate  of  deposit  not  draw- 
ing interest,  or  order  for  the  payment  of  any  sum  of  money  drawn  upon  or 
issued  by  any  bank,  trust  company  or  any  person  or  persons,  companies  or 
corporations,  at  sight  or  on  demand,  two  cents. 

Domestic  Bills  of  Exchange. — Bill  of  exchange  (inland),  draft,  certificate  of 
deposit  drawing  interest,  order  for  the  payment  of  any  sum  of  money,  other- 
wise than  at  sight  and  on  demand,  or  any  promissory  note  except  bank  notes 
issued  for  circulation,  and  for  each  renewal  of  the  same,  for  a  sum  not  exceed- 
ing one  hundred  dollars,  two  cents ;  and  for  each  additional  one  hundred  dol- 
lars or  fractional  part  thereof  in  excess  of  one  hundred  dollars,  two  cents. 

Foreign  Bills  of  Exchange. — Bills  of  exchange  (foreign)  or  letter  of  credit 
(including  orders  by  telegraph  or  otherwise  for  the  payment  of  money  issued 
by  express  or  other  companies  or  any  person  or  persons),  drawn  in  but  paya- 
ble out  of  the  United  States,  if  drawn  singly  or  otherwise  than  in  a  set  of 
three  or  more,  according  to  the  custom  of  merchants  and  bankers,  shall  pay 
for  a  sum  not  exceeding  one  hundred  dollars,  four  cents,  and  for  each  one 
hundred  dollars  or  factional  part  thereof  in  excess  of  one  hundred  dollars, 
four  cents.  If  drawn  in  sets  of  tv.'o  or  more:  For  every  bill  of  each  set,  where 
the  sum  made  payable  shall  not  exceed  one  hundred  dollars,  or  the  equiva- 
lent thereof  in  any  foreign  currency  in  which  such  bill  may  be  expressed, 
according  to  the  standard  of  value  fixed  by  the  United  States,  two  cents ;  and 
for  each  one  hundred  dollars  or  fractional  part  thereof  in  excess  of  one  hun- 
dred do^ars,  two  cents. 

That  the  acceptor  or  acceptors  of  any  bill  of  exchange  or  order  for  the 
payment  of  any  sum  of  money  drawn,  or  purporting  to  be  drawn,  in  any  for- 
eign country',  but  payable  in  the  United  States,  shall,  before  paying  or  accept- 
ing the  same,  place  thereupon  a  stamp,  indicating  the  tax  upon  the  same,  as 
the  law  requires  for  inland  bills  of  exchange  or  promissory  notes;  and  no  bill 

•  Law  abolished,  to  take  efiFcct  July  r,  1902,  Act  of  April  12,  1902. 


301 

of  exchange  shall  be  paid  or  negotiated  without  such  stamp ;  and  if  any 
person  shall  pay  or  negotiate,  or  offer  in  payment,  or  receive  or  take  in  pay- 
ment, any  sucli  draft  or  order,  the  person  or  persons  so  offending  shall  be 
deemed  guilty  of  a  misdemeanor,  and  upon  conviction  thereof  shall  be  pun- 
ished by  a  fine  not  exceeding  one  hundred  dollars,  in  the  discretion  of  ilie 
court. 

Mortgages  and  Collaterals. — Mortgage  or  pledge  of  lands,  estate,  or  prop- 
erty, real  or  personal,  heritable,  or  movable,  whatsoever,  where  the  same  shall 
be  made  as  a  security  for  the  payment  of  any  definite  and  certain  sum  of 
money,  lent  at  the  time  or  previously  due  and  owing  or  forborne  to  be  paid, 
being  payable  ;  also  any  conveyance  of  any  land,  estate,  or  property  whatso- 
ever, in  trust  to  be  sold  or  otherwise  converted  into  money,  which  shall  be 
intended  only  as  security,  either  by  express  stipulation  or  otherwise ;  on  any 
of  the  foregoing  exceeding  one  thousand  dollars  and  not  exceeding  one  thou- 
sand five  hundred  dollars,  twenty-five  cents ;  and  on  each  five  hundred  dol- 
lars or  fractional  jiart  thereof  in  excess  of  fifteen  hundred  dollars,  twenty-five 
cents.  Provided,  That  upon  each  and  every  assignment  or  transfer  of  a 
mortgage,  lease,  or  policy  of  insurance,  or  the  renewal  or  continuance  of  any 
agreement,  contract,  or  charter,  by  letter  or  otherwise,  a  stamp  duty  shall  be 
required  and  paid  at  the  same  rate  as  that  imposed  on  the  original  instrument. 

Protests. — Upon  the  protest  of  every  note,  bill  of  exchange,  acceptance, 
check  or  draft,  or  any  marine  protest,  whether  protested  by  a  notary  public 
or  by  any  other  officer  who  may  be  authorized  by  the  law  of  any  State  or 
States  to  make  such  protest,  twenty-five  cents. 

Penalties. — That  if  any  person  or  persons  shall  make,  sign,  or  issue,  or 
cause  to  be  made,  signed,  or  issued,  or  shall  accept  or  pay,  or  cause  to  be 
accepted  or  paid,  with  design  to  evade  the  payment  of  any  stamp  tax,  any 
bill  of  exchange,  draft,  or  order,  or  promissory  note  for  the  payment  of 
money,  liable  to  any  of  the  taxes  imposed  by  this  act,  without  the  same  being 
duly  stamped,  or  having  thereupon  an  adhesive  stamp  for  denoting  the  tax 
hereby  charged  thereon,  he,  she,  or  they  shall  be  deemed  guilty  of  a  misde- 
meanor, and  upon  conviction  thereof  shall  be  punished  by  a  fine  not  exceed- 
ing two  hundred  dollars,  at  the  discretion  of  the  court. 

SYNOPSIS    OF    DECISIONS  OF  THE    ATTORNEY-GENERAL 
AND  COMMISSIONERS  OF  INTERNAL  REVENUE. 

Certificates  of  Deposits— On  demand,  non-interest  bearing,  2  cents. 

Interest  bearing,  if  money  is  left  on  deposit  for  specified  time,  2  cents, 
when  issued,  and  if  paid  after  time  specified,  additional  stamps  must  be  affixed 
at  the  rate  of  2  cents  per  |ioo  or  fraction  thereof,  of  face  value. 

Checks. — Drawn  by  the  manager  of  the  clearing-house,  to  settle  balance 
between  banks,  2  cents. 

Used  in  the  nature  of  a  memorandum,  and  within  the  bank  exclusively, 
require  no  stamp. 

Drawn  by  any  officer  of  a  bank,  on  his  bank,  but  payable  to  third  person 
not  connected  with  the  bank,  2  cents. 

Drawn  within  the  U.  S.  on  a  domestic  or  foreign  bank,  2  cents. 


302 

Drawn  by  officers  of  State,  counties  and  municipalities  in  their  official 
capacity  against  public  funds,  require  no  stamp. 

Banks  should  not  pay  unstamped  checks  presented  for  payment,  but  should 
return  all  such  unstamped  checks  to  parties  presenting  same. 

Bank  checks  drawn  abroad,  but  payable  in  the  United  States,  a  cents. 

Drafts. — Sight  or  demand,  2  cents. 

Time,  2  cents  per  $100  or  fraction  thereof. 

If  drawee  named  in  a  draft  accepts  same  payable  at  a  bank,  an  additional 
2-cent  stamp  is  required. 

Drawn  in,  but  payable  outside  the  U.  S.,  if  drawn  singly,  4  cents  per  $100 
or  fraction  thereof. 

Drawn  by  one  bank  upon  another  bank,  and  duly  stamped,  no  additional 
stamp  required. 

Drafts  drawn  abroad,  but  payable  within  the  United  States,  if  at  sight  or 
on  demand,  2  cents ;  if  drawn  otherwise  than  at  sight  or  on  demand  the  tax  is 
at  the  rate  of  2  cents  per  $100  or  fractional  part  thereof  of  face  value. 

The  party  first  negotiating  a  draft  or  bill  of  exchange  drawn  abroad,  but 
payable  within  the  United  States,  must  affix  and  cancel  the  required  stamp. 

Receipts,  etc. — Tendered  personally  by  depositor  upon  withdrawal  of  funds 
to  his  credit,  not  subject  to  stamp  tax. 

If  commercial,  negotiable  instruments  require  2-cent  stamp. 

Debits  or  charges  against  a  depositor's  account,  made  at  his  request,  in 
writing,  by  his  bank,  2  cents  each. 

Receipts  for  insurance  premiums,  gas,  water,  telephone,  bills,  and  the  like, 
when  paid  by  banks  and  charged  to  depositors'  accounts,  must  have  a  2-cent 
stamp  affixed  thereto,  as  orders  for  the  payment  of  money. 

Order  for  the  transfer  of  money,  by  telegraph  or  otherwise,  within  the  U.  S., 
2  cents  on  each  order ;  abroad,  4  cents  eacli  |ioo  or  fraction  thereof. 

Notes. — The  transfer  by  endorsement  of  promissory  notes  does  not  require 
a  stamp. 

Judgment  notes  containing  clause  authorizing  confession  of  judgment 
requires  25-cent  stamp  in  addition  to  stamp  required  as  a  promissory  note. 

Promissory  notes  must  be  stamped  at  the  rate  of  2  cents  per  $100  or  frac- 
tion thereof,  of  face  value. 

Promissory  notes  payable  at  a  bank  and  charged  to  the  maker's  account 
do  not  require  an  additional  2-cent  stamp.  A  written  order  from  the  depositor 
to  make  such  charge  must  bear  a  2-cent  stamp. 

Waiver  of  protest  on  a  note  does  not  require  a  25-cent  stamp. 
.  Collateral. — Certain  securities  or  other  property  pledged  for  a  definite  and 
fixed  sum  taxed  on  the  amount  of  loan  they  secure,  over  $1,000,  at  the  rate  of 
25  cents  for  each  $500  over  |i,ooo. 

Held  as  indemnity  or  as  a  basis  of  credit  or  a  guarantee  generally,  no  par- 
ticular property  being  specified  as  security  for  the  payment  of  a  definite  and 
fixed  sum,  not  taxable. 

Reports. — The  reports  of  earnings  and  dividends  and  of  condition  made  by 
National  Banks  to  Comptroller  of  the  Currency  do  not  require  a  stamp. 

The  list  of  shareholders  required  by  Comptroller  of  the  Currency  from 
National  Banks  does  not  require  a  stamp. 

Semi-annual  returns  of  National  Banks  of  notes  in  circulation  made  to  U  S. 
Treasurer  do  not  require  a  stamp. 


303 


DIGEST   OF   DECISIONS   RENDERED    SINCE  THE   PUBLICA- 
TION OF  EDITION  OF  OCTOBER,  1898. 


Act  authorizing  National  Banks  of  $25,000  Capital  also 
Circulation  to  Face  Value  of  Bonds,  etc. 


POWERS  AND   LIABILITIES  OF  NATIONAL  BANKS. 

Under  Section  5136. 

Accommodation  Guaranty. — A  National  bank  has  no  power 
to  give  an  accommodation  guaranty,  and  such  a  guaranty  is  not 
enforceable  against  the  bank.  (Bowen  v.  Needles  National  Bank, 
94  Fed.  Rep.,  925  ;  Groosz;.  Brewster  (Tex.),  55  S.  W.  Rep.,  590.) 

In  the  cases  cited  a  National  bank  advised  plaintiff  that  it  would 
pay  all  checks  of  a  third  person,  although  such  person  had  no 
funds  on  deposit,  as  was  known  to  both  plaintiff  and  the  hank. 
In  reliance  on  such  promise,  plaintiff  cashed  checks  of  such  per- 
son, and  transmitted  them  to  the  bank  for  payment.  The  bank 
issued  and  sent  to  plaintiff  its  drafts  on  a  correspondent  for  the 
amount  of  the  checks,  which  drafts  were  refused  payment.  Held, 
that  the  contract  was  one  purely  of  guaranty,  and  was  ultra  vires 
on  the  part  of  the  bank,  and  the  transaction  gave  plaintiff  no  right 
of  action  against  it  on  the  drafts. 

Purchase  of  Stock  of  Other  National  Banks. — A  National 
bank  can  not  lawfully  acquire  and  hold  the  stock  of  another  Na- 
tional bank  as  an  investment.  *  (First  National  Bank  of  Concord 
V.  Hawkins,  174  U.  S.,  364.) 

*  The  court  in  this  case  said  :  "  We  think  that  the  reasons  which  disqual- 
ify a  National  bank  from  investing  its  money  in  the  stock  of  another  corpor- 
ation are  quite  as  obvious  when  that  other  corporation  is  a  National  bank  as 
in  the  case  of  other  corporations.  The  investment  by  National  banks  of  their 
surplus  funds  in  other  National  banks,  situated  perhaps  in  distant  States  as 
in  the  present  case,  is  plainly  against  the  meaning  and  policy  of  the  statutes 
from  which  they  derive  their  powers,  and  evil  consequences  would  be  certain 
to  ensue  if  such  a  course  of  conduct  were  countenanced  as  lawful.  Thus  it 
is  enacted  in  Section  5146  that  '  every  director  must,  during  his  whole  term 
of  service,  be  a  citizen  of  the  United  States,  and  at  least  three-fourths  of  the 


3^4 

And  where  such  stock  has  been  purchased  the  bank  may  plead 
its  want  of  power  as  a  defense  to  an  assessment  upon  the  stock, 
notwithstanding  it  appears  as  the  registered  owner  thereof,  and 
has  received  and  retained  the  dividends  thereon.      {Id.) 

Cashier — Fraud  of. — The  subsequent  fraud  of  its  Cashier  will 
not  relieve  a  National  bank  from  its  liability  as  indorser  on  paper 
transferred  by  its  Cashier  within  the  scope  of  his  authority  to  an 
innocent  third  person.  (Auten  v.  Manistee  Nat.  Bank,  54  S.  W. 
Rep.,  337.) 

Safe  Deposit  Boxes. — The  Comptroller  of  the  Currency  holds 
that  while  there  is  no  provision  of  the  statute  authorizing  National 
banks  to  invest  considerable  sums  in  the  building  of  safe  deposit 
vaults  for  the  purpose  of  making  that  a  prominent  feature  of  their 
business,  yet  the  investment  of  a  moderate  amount  for  such  pur- 
pose in  cities  where  companies  can  not  be  properly  organized  for 
the  sole  purpose  of  conducting  this  line  of  business  is  not  open  to 
criticism.  The  Comptroller  holds  that  the  matter  is  one  largely 
in  the  discretion  of  the  directors  of  the  bank. 

Manufacturing  Business. —  A  National  bank  has  no  power 
to  engage  in  a  manufacturing  busi^ess.  (Bletz  v.  Bank  of  Ken- 
tucky (Ky.),  55  S.  W.  Rep.,  697.) 

"When  Bank  Cannot  Set  up  its  "Want  of  Power. — Where  a 
National  bank  has  itself  purchased  notes  which  the  owner  had 
authorized  it  to  sell  to  a  third  party,  it  is  liable  for  their  value  as 

directors  must  have  resided  in  the  State,  Territory  or  district  in  which  the  as* 
sociation  is  located  for  at  least  one  year  immediately  preceding  their  election, 
and  must  be  residents  therein  during  their  continuance  in  ofl&ce.' 

"  One  of  the  evident  purposes  of  this  enactment  is  to  confine  the  manage- 
taent  of  each  bank  to  persons  who  live  in  the  neighborhood,  and  who  may 
for  that  reason  be  supposed  to  know  the  trustworthiness  of  those  who  are  to 
be  appointed  officers  of  the  bank,  and  the  character  and  financial  ability  of 
those  who  may  seek  to  borrow  its  money.  But  if  the  funds  of  a  bank  in  New 
Hampshire,  instead  of  being  retained  in  the  custody  and  management  of  its 
directors,  are  invested  in  the  stock  of  a  bank  in  Indiana,  the  policy  of  this 
wholesome  provision  of  the  statute  would  be  frustrated.  The  property  of  the 
local  stockholders,  so  far  as  thus  invested,  would  not  be  managed  by  directors 
of  their  own  selection,  but  by  distant  and  unknown  persons.  Another  evil 
that  might  result,  if  large  and  wealthy  banks  were  permitted  to  buy  and  hold 
the  capital  stock  of  other  banks,  would  be  that  in  that  way  the  banking  cap- 
ital of  a  community  might  be  concentrated  in  one  concern,  and  business  men 
be  deprived  of  the  advantages  that  attend  competition  between  banks.  Such 
accumulation  of  capital  would  be  in  disregard  of  the  policy  of  the  National 
Banking  Law,  as  seen  in  its  numerous  provisions  regulating  the  amount  of 
the  capital  stock,  and  the  methods  to  be  pursued  in  increasing  or  reducing  it. 
The  smaller  banks  in  such  a  case  would  be  in  fact,  though  not  in  form, 
branches  of  the  larger  one." 


305 

for  a  conversion,  even  though  it  had  not  the  power  to  act  as  the 
owner's  agent  for  the  sale  thereof  (First  National  Bank  of  Grand 
Forks  V.  Anderson,  172  U.  S.,  573.)  So,  where  it  uses  in  its  busi- 
ness monej'  obtained  by  one  of  its  oflBcers  as  a  loan  to  it.  it  cannot 
escape  liability  therefor  upon  the  ground  that  the  loan  was  not 
negotiated  by  it,  or  by  its  directors,  or  that  it  could  not  itself  have 
legally  borrowed  the  raonej'.  (Aldrich  v.  Chemical  National 
Bank,  176  U.  S.,  618.) 

A  National  bank  took  as  security  for  a  debt,  partly  pre-existent 
and  partly  created  at  the  time,  a  real  estate  mortgage,  naming  an 
individual,  an  officer  of  the  bank,  as  mortgagee.  The  transaction 
was  usurious.  Held,  that,  having  given  the  transaction  the  form 
of  one  with  an  individual,  for  the  purpose  of  evading  the  liabilities 
peculiar  to  National  banks,  the  bank  could  not  be  heard  to  assert 
its  true  nature,  for  the  purpose  of  evading  the  liabilities  attached 
to  individuals,  and  of  claiming  the  privileges  of  National  banks. 
(Gadsden  v.  Thrush,  76  N.  W.  Rep.,  1060.) 

Under  Section  5137. 

While  a  National  Bank  is  forbidden  to  lend  money  on  real  estate 
security,  this  does  not  aflfect  the  contract,  and  the  security  may  be 
enforced  ;  and  though  the  bank  when  it  discounts  a  note  does  not 
know  that  the  same  is  secured  by  a  mortgage  upon  real  estate,  yet 
it  may,  upon  discovering  the  security,  enforce  the  same  for  its  own 
benefit.  (George  v.  Somerville  (Mo.),  Bankers'  Magazine,  Vol. 
LX,  p.  391.) 

Under  Sections  62^  and  5198. 

Citizenship  — Jurisdiction.  —  For  jurisdictional  purposes  a 
National  bank  is  to  be  regarded  as  a  citizen  of  the  State  where  it 
is  located.  (Hazen  v.  lyyndonville  National  Bank  (Vt.),  41  Atl. 
Rep.,  1046.) 

Under  Section  5198. 

Usury — Penalty. — Where  the  laws  of  a  State  or  Territory  ex- 
pressly authorize  parties  to  contract  in  writing  for  any  rate  of  in- 
terest, such  laws  apply  in  favor  of  the  National  banks  located  in 
such  State  or  Territory,  and  they  are  at  liberty  to  contract  for  any 
rate  of  interest.    (Daggs  v.  Phoenix  National  Bank,  177  U.  S.,  549.) 


3o6 

Under  the  Federal  statute  the  defendant  has  no  right  to  set  off 
usurious  interest  paid  on  the  note  ;  but  he  must  resort  to  a  separ- 
ate action  to  recover  back  such  interest.  (Central  National  Bank 
V.  Haseltine,  55  S.  W.  Rep.,  1015.) 

The  action  cannot  be  maintained  unless  the  usurious  interest 
has  been  actually  paid  by  the  borrower.  (Haseltine  v.  Central 
National  Bank,  Bankers'  Magazine,  Vol.  L,X,  p.  48.) 

The  amount  of  recovery  is  twice  the  amount  of  the  interest  paid, 
and  not  merely  double  the  excess  over  the  legal  rate.  (Watt  v. 
First  National  Bank  of  Lake  Benton  (Minn.),  79  N.  W.  Rep.,  509.) 

The  right  to  recover  double  the  interest  paid  is  personal  to  the 
party  paying  such  usurious  interest ;  and  an  action  to  recover  the 
same  can  be  maintained  only  by  such  person,  or  his  or  her  legal 
representative.  (Lealos  v.  Union  National  Bank,  Bankers'  Maga- 
zine, Vol.  I/IX,  p.  24.) 

Where  two  persons  execute  their  joint  note  in  favor  of  a  National 
bank,  which  note  is  claimed  to  be  wholly  for  usury,  and  the  same 
is  paid  by  one  of  the  joint  makers,  an  action  can  not  be  maintained, 
under  the  .section  above  referred  to,  to  recover  the  penalty  therein 
provided,  by  the  other  maker.  The  cause  of  action  accrues  to  the 
person  making  the  payment.  (L^alos  v.  Union  Nat.  Bank,  Bank- 
ers' Magazine,  Vol.  LX,  page  240.)  The  New  York  statute  pro- 
viding that  corporations  may  not  plead  usury  applies  to  National 
Banks.  (Binghampton  Trust  Company  v.  Auten,  57  S.  W.  Rep., 
1105.) 

Under  Section  3201. 

Lien  on  Stock. — A  National  bank  cannot  acquire  a  lien  upon 
the  shares  of  its  own  stock  for  a  loan  made  by  it  to  the  owner 
thereof.  The  fact  that  the  certificates  of  stock  bear  upon  their 
face  a  notice  that  the  stock  is  subject  to  the  lien  of  the  bank  does 
not  affect  the  rights  of  a  purchaser,  inasmuch  as  the  bank  is  pro- 
hibited from  acquiring  such  lien.  (Buffalo  German  Insurance 
Company  v.  Third  National  Bank  of  Buffalo,  162  N.  Y.,  163. 

Under  Section  5190. 

Legal  Residence  of  Bank — Branches. — It  is  now  held  by  the 
Comptroller  of  the  Currency  that  the  legal  residence  of  the  bank  is 
the  particular  location,  that  is,  the  street  and  number  in  the  place 


307 

designated  in  its  organization  certificate,  or  in  case  of  removal  its 
new  location,  and  therefore  that  it  cannot  have  branches  in  the 
same  city,  and  cannot  have  elsewhere. 

Under  Section  S^09- 

The  law  of  Kansas  making  oflficers  of  banking  institutions  re- 
sponsible for  the  reception  of  deposits  or  the  creation  of  debts,  when 
such  bank  is  insolvent  or  in  a  failing  condition,  are  not  applicable  to 
National  banks  or  their  officers.  (Stout  v.  Lusk,  59  Pac.  Rep., 
603.) 

Under  Section  5220. 

Expiration  of  Charter. — A  National  bank,  after  the  expira- 
tion of  the  time  limit  of  its  charter,  continues  to  exist  as  a  body 
corporate,  capable  of  suing  and  being  sued,  until  its  affairs  are 
completely  settled.  (Farmers'  National  Bank  of  Owatonna  v. 
Backus  (Minn.),  77  N.  W.  Rep.,  142.) 


STOCK  AND  STOCKHOLDERS. 

Under  Sectioyi  514.2. 
Increase  of  Capital  Stock. — The  provision  of  Sec.  5142,  Rev. 
Stat.  U.  S.,  to  the  effect  that  no  increase  of  capital  stock  shall  be 
valid  until  the  whole  amount  thereof  is  paid  in,  does  not  create  a 
condition,  express  or  implied,  that  shares  subscribed  and  paid  for 
in  full  are  not  valid  unless  the  entire  amount  of  the  proposed  in- 
crease is  subscribed  and  paid  for  in  full.  (Scott  v.  I^atimer,  89 
Fed.  Rep.,  843.) 

Under  Section  5 131. 

Stock  Held  as  Collateral  Security. —  Though  the  pledgee 
of  National  bank  stocks  buys  in  the  same  at  the  sale  thereof,  and 
credits  the  amount  of  the  purchase  price  on  the  indebtedness  to 
which  it  is  collateral,  and  retains  the  certificates,  yet  he  will  not 
be  liable  for  an  assessment  upon  the  stock  in  case  of  the  bank's 
insolvency,  unless  he  has  the  stock  transferred  to  himself  upon  the 
books  of  the  bank.  (Robinson  v.  Southern  National  Bank,  94 
Fed.  Rep.,  964.) 

When  it  is  proved  or  admitted  that  the  person  in  whose  name 
National  bank  stock  stands  is  a  mere  pledgee,  then  the  burden  is 


3o8 

upon  the  Receiver  attempting  to  enforce  an  assessment  upon  such 
stock  against  such  person  to  show  that  he  knowingly  permitted  the 
stock  to  stand  in  his  name  on  the  books  of  the  bank.  (Tourtelot 
V.  Stoltenben,  loi  Fed.  Rep.,  362.) 

Certain  shares  of  the  M.  National  Bank,  owned  by  B,  were  pledged 
by  him  to  the  O.  National  Bank  as  collateral  security  for  his  in- 
debtedness to  the  latter  bank,  and  were  transferred  upon  the  books 
of  the  M.  bank  to  "  C,  Cashier  of  O.  National  Bank."  Held,  that 
the  O.  National  Bank  was  not  liable  for  an  assessment  upon  such 
stock.     (Fraler  v.  Old  National  Bank,  ici  Fed.  Rep.,  391.) 

Assessment. — The  Comptroller  of  the  Currency  has  power  to 
order  successive  assessments  against  the  stocholders  of  an  insolvent 
National  bank  ratably  on  all,  where  the  aggregate  does  not  ex- 
ceed the  par  value  of  the  stock.  (Aldrich  v.  Campbell,  97  Fed. 
Rep.,  663;  Studebaker  v.  Perry,  102  Fed.  Rep.,  947.) 

Where  the  assessment  upon  the  stockholders  is  for  less  than  the 
full  amount  of  their  liability  the  same  may  be  collected  by  a  suit 
in  equity  ;  and  where  questions  are  involved  which  are  common  to 
a  number  of  stockholders  they  may  be  joined  as  defendants. 
(Bailey  v.  Tillinghast,  99  Fed.  Rep.,  801.) 

The  action  of  the  Comptroller  in  making  the  assessment  is  con- 
clusive as  to  the  necessity  therefor,  and  can  not  be  questioned  col- 
laterally.    (Aldrich  v.  Campbell,  97  Fed.  Rep.,  663.) 

It  is  incompatible  with  the  policy  and  purposes  for  which 
National  banks  are  created  and  allowed  to  do  business  that  mere 
irregularities,  or  even  fraudulent  practices  in  organization  or  man- 
agement, should  wholly  invalidate  the  exercise  of  their  vital  func- 
tions, and  give  ground  to  a  stockholder  to  repudiate  his  obliga- 
tions to  the  public.     (Bailey  v.  Tillinghast,  99  Fed.  Rep.,  801.) 

Where  for  a  long  time  a  person  has  actually  sustained  the  rela- 
tion of  stockholder  to  a  National  bank,  he  will  not  be  permitted  to 
escape  the  statutory  liability  by  rescinding  his  subscription  after 
the  appointment  of  a  receiver  for  the  bank,  although  his  subscrip- 
tion was  obtained  under  such  circumstances  that  he  would  be 
entitled  to  rescind  as  between  him  and  the  bank.  (Scott  v.  Lati- 
mer, 89  Fed.  Rep.,  843.) 

Subscribers  to  new  stock  were  given  old  stock  instead.  The 
fact  that  the  stock  was  of  the  original  issue  appeared  on  the  cer- 


309 

tificate,  and  on  the  books  of  the  bank,  and  the  stock  was  retained 
by  the  subscribers  without  dissent  for  tliree  years.  Held,  that 
they  were  estopped  to  question  their  liability  as  stockholders. 
(Bailey  v.  Tillinghast,  99  Fed.  Rep.,  801.) 

A  stockholder  in  a  National  bank  in  process  of  liquidation  can 
not  set  off  his  distributive  .share  in  the  assets  against  his  liability 
on  his  stock.     (First  National  Bank  v.  Riggins,  32  S.  E.  Rep. ,  801 .) 

A  right  of  action  by  the  receiver  of  an  insolvent  National  bank 
against  a  stockholder  to  recover  an  assessment  does  not  arise  until 
the  necessity  for  the  assessment  has  been  determined  and  the 
assessment  made  by  the  Comptroller,  if  it  in  fact  accrues  before 
demand  and  refusal  to  pay  ;  hence  limitation  runs  against  such  an 
action  only  from  that  time.    (Aldrich  v.  Yates,  95  Fed.  Rep.,  78.) 

It  is  no  defense  to  a  stockholder  in  an  insolvent  National  bank 
who  is  sued  by  the  Receiver  on  his  individual  liability  upon  an 
assessment  ordered  by  the  Comptroller  of  the  Currency,  to  say  that 
the  Receiver  has  unlawfully  disposed  of  such  claim,  and  that  the 
creditors  of  such  bank  will  not  receive  of  the  proceeds  thereof  as 
much  as  they  are  entitled  to.  (Schaberg's  Estate  v.  McDonald, 
83  N.  W.  Rep.,  737.) 

The  books  of  a  National  bank  are,  among  the  shareholders,  pub- 
lic records  and  evidence  of  what  they  show,  and  are  admissible 
against  a  shareholder  in  an  action  brought  against  him  by  the 
Receiver  to  recover  an  assessment  upon  his  stock.  (Brown  v.  Ellis, 
103  Fed.  Rep.,  834.) 


DIRECTORS. 

Under  Section  514.7. 

False  Reports — Liability  of  Directors  for. — Directors  of  a 
National  bank  who,  in  a  simulated  performance  of  the  duties  pre- 
scribed by  the  law  applicable  to  such  an  institution,  relative  to  the 
preparation  and  publication  of  advertisements,  statements  and 
reports,  knowingly  make  and  publish  false  statements  and  reports 
of  the  financial  condition  of  the  bank,  with  intent  to  deceive,  and 
such  matters  are  believed  and  acted  upon  \yy  parties,  to  their 
damage,  are  liable  for  the  damages,  in  an  action  for  the  deceit. 
(Stuart  V.  Staplehurst  (Neb.),  78  N.  W.  Rep.,  298.) 


3IO 
INSOLVENT    BANKS. 

Under  Section  524.2. 

Preferences. — So  long  as  a  National  bank  is  a  going  concern, 
carrjung  on  its  business  as  usual,  and  has  committed  no  act  of  in- 
solvency, and  it  does  not  appear  that  a  present  suspension  of  busi- 
ness is  contemplated  by  its  officers,  though  it  is  actually  insolvent, 
to  their  knowledge,  payments  or  remittances  made  or  caused  to  be 
made  to  a  correspondent  bank  in  the  due  course  of  its  daily  busi- 
ness can  not  be  said  to  have  been  made  in  contemplation  of  insolv- 
ency, or  with  a  view  to  prefer  the  correspondent  as  a  creditor,  within 
the  meaning  of  Rev.  St.,  §  5242,  making  such  payments  void. 
(McDonald  v.  Chemical  National  Bank,  174  U.  S.,  610.) 

The  mere  fact  that  a  correspondent  of  a  National  bank  refuses 
to  pay  a  check  drawn  on  it  by  such  bank  at  a  time  when  the 
account  of  the  latter  is  overdrawn,  does  not  constitute  an  act  of 
insolvency  on  the  part  of  the  drawing  bank,  which  would  render 
subsequent  transfers  of  property  or  payments  made  by  it  void,  as 
preferences,  under  Rev.  St.,  §  5242.     (/</,) 

Where  a  National  bank  has,  during  a  series  of  years,  kept  an 
account  with  another  bank,  against  which  it  has  drawn  in  the  daily 
course  of  its  business,  and  has  also  constantly  made  remittances  to 
its  correspondent,  through  the  mails,  in  the  form  of  check  of  third 
parties,  for  collection  and  credit  to  its  said  account,  there  is  an  im- 
plied general  agreement  and  understanding  that  such  remittances 
are  in  the  nature  of  payments  on  account,  and  their  deposit  in  the 
mail  is  a  delivery  to  the  correspondent,  whose  property  therein  is 
not  destroyed  or  impaired  by  the  suspending  of  the  sending  bank 
or  the  appointment  of  a  receiver  therefor  before  their  actual  receipt ; 
nor  is  it  aflfected  by  the  fact  that  in  case  the  paper  remitted  should 
be  destroyed  in  transmission,  or  prove  uncollectible,  the  loss  would 
fall  upon  the  remitting  bank.     {Id?) 

Dividends — Collaterals. — A  secured  creditor  of  an  insolvent 
National  bank  may  prove  and  receive  dividends  upon  the  face  of 
his  claim  as  it  stood  at  the  time  the  insolvency  was  declared  with- 
out crediting  either  his  collaterals  or  collections  made  therefrom 
after  the  insolvency,  provided  that  dividends  must  cease  when 
from  them  and  from  the  collaterals  realized  the  claim  has  been 


3" 

paid  in  full.  (Aldrich  v.  Chemical  National  Bank  of  New  York, 
176  U.  S.,  618.) 

The  Receiver  of  a  National  bank  can  not  recover  a  dividend  paid 
not  at  all  out  of  profits,  but  entirely  out  of  the  capital,  when  the 
stockholder  receiving  such  dividend  acted  in  good  faith,  believing 
the  same  to  be  paid  out  of  profits,  and  when  the  bank,  at  the  time 
such  dividend  was  declared  and  paid,  was  not  insolvent.  (McDon- 
ald V.  Williams,  174  U.  S.,  397.) 

A  secured  creditor  of  an  insolvent  National  bank  may  prove  and 
receive  dividends  upon  the  face  of  his  claim  as  it  stood  at  the  time 
of  the  declaration  of  insolvency,  without  crediting  either  his  col- 
laterals, or  his  collections  made  afterwards,  subject  always  to  the 
proviso  that  dividends  must  cease  when  from  them  and  the  col- 
laterals realized  the  claim  has  been  paid  in  full.  (Merrill  v.  Na- 
tional Bank  of  Jacksonville,  173  U.  S.,  131.) 

Where  a  number  of  the  shareholders  of  a  National  bank  in  good 
faith  paid  an  assessment  made  to  comply  with  a  requirement  of  the 
Comptroller  to  make  good  an  impairment  of  the  bank's  capital, 
although  such  assessment  was  invalid  because  made  by  the  direc- 
tors, instead  of  by  the  stockholders,  on  the  insolvency  of  the  bank, 
and  the  winding  up  of  its  affairs  by  a  receiver,  after  outside  credi- 
tors are  paid,  such  paying  shareholders  are  entitled  to  be  treated 
as  creditors  as  against  the  non-paying  shareholders,  and  repaid  the 
amounts  so  paid,  before  general  distribution  of  the  remaining  assets 
among  all  the  shareholders.     {In  re  Hulitt,  6th  Ct.,  96  Fed.  Rep., 

785.) 

Under  Section  S^34' 

Sales  by  Receiver — Authority  of — ^Jurisdiction  of  Courts — 
Notice  to. — The  courts  are  not  vested  with  any  general  supervis- 
ory or  directing  power  over  the  liquidation  of  insolvent  National 
banks,  and  can  not  order  or  authorize  a  Receiver  to  sell  at  private 
sale  securities  held  by  the  bank  as  pledgee,  which  do  not  come 
within  the  authority  given  by  Rev.  St.,  §  5234,  to  order  the  sale 
or  compounding  of  bad  or  doubtful  debts,  or  the  sale  of  real  or 
personal  property  of  the  association.     {In  re  Earle,  92  Fed.  Rep., 

22.) 

A  sale  by  a  Receiver  of  a  National  bank  under  an  order  of  a 
court  of  competent  jurisdiction  is  a  judicial  sale,  and  the  approval 


312 

thereof  by  the  court  has  the  force  and  effect  of  a  judgment,  and 
such  proceedings  are  not  subject  to  collateral  attack.  (Schaberg's 
Estate  V.  McDonald,  83  N.  W.  Rep.,  737.) 

A  Receiver  of  an  insolvent  National  bank  may  apply  to  a  court  of 
record  of  competent  jurisdiction  for  an  order  to  sell  stocks  and  bonds 
in  pledge  in  his  hands.  It  is  not  necessary  that  he  should  obtain 
from  the  Comptroller  of  the  Currency  formal  authorization  to  make 
the  application ;  nor  is  it  essential  that  he  should  likewise  have 
the  authority  of  the  Comptroller  to  sell.  (Richardson  v.  Turner, 
52  I^.  Ann.,  1613.) 

Such  receiver  has  authority,  upon  sufficient  consideration,  to 
extend  the  time  of  payment  of  a  debt  owing  such  bank,  where  by 
so  doing  he  can,  in  his  judgment,  strengthen  the  security  beholds 
for  the  payment  of  such  debt.  (People's  State  Bank  of  Lakota  v. 
Francis,  79  N.  W.  Rep.,  853.) 

Where  a  Receiver  is  placed  in  charge  of  the  assets  of  a  National 
bank,  he  stands,  as  to  such  assets,  in  the  place  of  the  bank,  and 
is  chargeable  with  knowledge  of  all  facts  known  to  the  bank 
affecting  the  character  of  such  assets,     ild.') 

The  Receiver  of  a  National  bank  may  be  sued  in  a  Federal  Court 
in  relation  to  a  contract  made  by  him  on  behalf  of  the  estate  in  the 
course  of  its  administration.  (Gilbert  v.  McNulta,  Bankers'  Maga- 
zine, Vol.  I^IX,  page  752.) 

In  a  suit  between  the  Receiver  of  a  National  bank  and  a  stock- 
holder the  books  of  the  bank  are  evidence  to  establish  acts  of  the 
corporation  and  its  financial  condition  at  a  particular  time,  though 
not  as  to  dealings  between  the  corporation  and  the  defendant. 
(Hayden  v.  Williams,  96  Fed.  Rep.,  279.) 

The  Receiver  of  an  insolvent  National  bank  may  recover  from  a 
stockholder  dividends  declared  and  paid  after  the  bank  became  in- 
solvent, where  necessar\'^  to  meet  the  demands  of  creditors.  (Hay- 
den V.  Williams,  96  Fed.  Rep.,  279.) 

A  judgment  recovered  by  the  Receiver  of  an  insolvent  National 
bank  against  a  stockholder  on  an  assessment  made  by  the  Comp- 
troller, although  uncollectible,  is  not  a  "bad  or  doubtful  debt," 
which  a  court  may  authorize  the  receiver  to  compound,  under 
Rev.  St.,  §  5234.     {In  re  Earle,  96  Fed.  Rep.,  678.) 

Presentment  of  Paper  When  Bank  Closed  by  Comp- 
troller.— When  a  National  bank  at  which  a  promissory  note  is 


3^3 

payable  is  placed  in  the  hands  of  a  bank  examiner  presentment 
may  be  made  to  such  examiner.  (Auten  v.  Manistee  Nat.  Bank, 
54  S.  W.  Rep.,  337.) 


SUITS,  JURISDICTION  AND  EVIDENCE. 

Under  Section  _3,  Act  June  ^o,  1876. 

The  Federal  courts  have  jurisdiction  of  an  action  by  or  against  the 
agent  of  the  shareholders  of  a  National  bank  chosen  under  the  act 
of  June  30,  1876,  and  the  amendments  thereto,  regardless  of  the 
question  of  citizenship  ;  and  such  a  suit  may  be  removed  from  a 
State  to  a  Federal  court.  (Guarantee  Company  of  North  Dakota 
V.  Hanway,  104  Fed.  Rep.,  369.) 

Under  Section  524.2. 

The  act  of  Congress  forbidding  an  attachment  against  a  Na- 
tional bank  before  final  judgment  is  constitutional.  (Dennis  v. 
First  National  Bank  of  Seattle,  59  Pac.  Rep.,  777.) 

An  attachment  sued  out  against  a  National  bank  as  garnishee 
is  not  an  attachment  against  the  bank  or  its  property  within  the 
meaning  of  Section  5242,  Rev.  St,  U.  S.       (Earle  v.  Pennsylvania, 

178  u.  s.,  449) 

The  right  acquired  by  such  an  attachment  is  not  lost  to  the 
attaching  creditor  by  the  suspension  of  the  bank  and  the  appoint- 
ment of  a  Receiver.     {,Id.') 

But  the  distribution  of  the  bank's  as.sets  in  the  hands  of  the 
Receiver  cannot  be  in  any  wise  directly  controlled  by  the  State  court 
issuing  the  attachment,  or  seized  under  an  attachment  or  execu- 
tion in  the  hands  of  any  State  ofiScer.     {Id.') 

The  Receiver  of  a  National  bank  may  be  notified  by  service 
upon  him  of  an  attachment  issued  from  a  State  court  of  the  nature 
and  extent  of  the  interest  asserted  or  sought  to  be  acquired  by  the 
plaintiff  in  the  attachment  in  the  assets  in  his  custody.  (Earle 
as  Receiver  of  The  Chestnut  Street  National  Bank  v.  Conway, 
178  U.  S.,  456.) 

But  such  an  attachment  cannot  create  any  lien  upon  specific 
assets  of  the  bank  in  the  hands  of  the  Receiver  nor  disturb  his 


3H 

custody  of  those  assets,  nor  prevent  him  from  paying  to  the 
Treasurer  of  the  United  States,  subject  to  the  order  of  the  Comp- 
troller of  the  Currency,  all  moneys  coming  to  his  hands  or  realized 
by  him  as  Receiver  from  the  sale  of  the  property  and  assets  of  the 
bank.     {Id.) 

Under  Section  884.. 

The  Comptroller's  certificate  upon  which  the  bank  is  allowed  to 
do  business,  and  his  further  certificate  approving  an  increase  of 
capital  stock,  are  conclusive  evidence  of  all  facts  which  he  is  re- 
quired to  ascertain  before  the  issuance  thereof.  (Bailey  v.  Till- 
inghast,  99  Fed.  Rep.,  801.) 

The  certificate  of  the  Comptroller  of  the  Currency  approving  a 
reduction  of  the  capital  stock  of  the  bank  is  itself  proof  of  the 
reduction.     (Brown  v.  Ellis,  103  Fed.  Rep.,  834.) 

The  original  order  of  the  Comptroller  of  the  Currency,  laying 
an  assessment  upon  the  shares,  under  his  signature  and  official 
seal,  proves  itself.     (Brown  v.  Ellis,  103  Fed.  Rep.,  834.) 


TAXATION. 

Under  Section  52 ig. 

Meaning  of  Term  "Moneyed  Capital."  —  The  term 
"moneyed  capital"  as  used  in  §  5219,  Rev.  vSt.  U.  S.,  does  not 
include  capital  which  does  not  come  into  competition  with  the 
business  of  National  banks ;  and  exemptions  from  taxation,  how- 
ever large,  such  as  deposits  in  savings  banks  or  of  moneys  belong- 
ing to  charitable  institutions,  which  are  exempted  from  reasons 
of  public  policy,  and  not  as  an  unfriendly  discrimination  as  against 
investment  in  National  bank  shares,  can  not  be  regarded  as  forbid- 
den by  the  Federal  statute.  (First  National  Bank  of  Wellington 
V.  Chapman,  173  U.  S.,  205.) 

Trust  Companies. — The  assessment  of  bank  stock  at  a 
greater  rate  than  individual  capital  is  assessed  in  Trust  com- 
panies of  the  city  where  the  bank  is  located,  is  not  violative  of 
Section  52 19  of  the  United  States  Revised  Statutes  ;  for  Trust  com- 
panies, even  under  the  enlarged  powers  conferred  upon  them  by 
the  New  York  Banking  I^aw  of  1892,  are  not,  in  a  legal  or  com- 


315 

mercial  sense,  engaged   in  the  business  of  banking.     (Jenkins  v. 
Neff,  163  N.  Y.,  320.) 

Deductions — Credits. — The  fact  that  by  tax  laws  of  a  State 
the  owners  of  what  are  termed  "  credits  "  are  allowed  to  deduct 
their  debts  therefrom,  and  are  assessed  only  upon  the  balance, 
while  no  such  right  of  deduction  is  given  to  the  owners  of  National 
bank  shares,  can  not  be  held  an  unlawful  discrimination  against 
the  latter,  in  the  absence  of  any  data  from  which  the  court  can 
determine  what  proportion  the  moneyed  capital  of  individual  citi- 
zens included  in  the  term  ' '  credits ' '  bears  to  the  amount  invested 
in  National  bank  shares.  (First  National  Bank  of  Wellington  v. 
Chapman,  173  U.  S.,  205.) 

In  ascertaining  the  true  value  of  the  shares  of  bank  stock  for 
the  purposes  of  taxation,  the  laws  of  New  Jersey  do  not  require 
that  the  non-taxable  property  of  the  banks  should  be  deducted 
from  their  assets.  (Mechanics'  National  Bank  v.  Baker,  46  Atl. 
Rep.,  586.) 

Personal  Property  of  Bank. — The  personal  property  of  a 
National  bank  can  not  be  directly  assessed  for  taxation  by  State 
authority.  (City  and  County  of  San  Francisco  v.  Crocker- Wool- 
worth  National  Bank,  92  Fed.  Rep.,  273.) 

Real  Estate. — In  fixing  the  actual  value  of  shares  of  bank 
stock  for  the  purposes  of  taxation,  the  real  estate  of  the  bank  is  to 
be  taken  at  its  actual  value,  notwithstanding  it  is  assessed  at  a 
lower  valuation.     (Jenkins  v.  Neflf,  163  N.  Y.,  320.) 

Under  the  statutes  of  Indiana  the  real  estate  owned  by  a  Na- 
tional bank  is  not  to  be  included  in  the  valuation  of  the  shares  of 
stock  for  purposes  of  taxation.  (Board  of  Commissioners  of  Mor- 
gan County  V.  First  National  Bank,  57  N.  K.  Rep.,  728.) 

But  where  the  real  estate  has  been  so  included,  and  the  bank 
has  also  paid  a  tax  upon  the  real  estate  as  such,  the  latter  tax  can 
not  be  recovered  by  the  bank ;  for  the  wrong  done  was  in  the  over- 
valuation of  the  stock,  and  not  in  the  assessment  of  the  real  estate 
to  the  bank.     (/^.) 

Section  34  of  the  Bank  Act  of  New  Jersey  (March  24,  1889),  by 
exempting  from  taxation  all  the  real  and  personal  property  of 
banks,  has  done  away  with  the  reason  of  the  decision  in  Bank  v. 


3i6 

Williams  (58  N.  J.  I^aw,  45),  to  the  effect  that  the  value  of  their 
real  estate  should  not  be  computed  in  estimating  the  assessable 
value  of  their  stock  held  by  individuals.  (Mechanics'  National 
Bank  of  Trenton  v.  Baker,  46  Atl.  Rep.,  586.) 

Agreement  of  Bank  to  Pay  Taxes. —  An  agreement  by  a 
National  bank  to  pay  taxes  on  its  stock  transferred  to  it,  and  as- 
sessed at  the  time  against  the  sellers,  in  consideration  of  being  al- 
lowed to  retain  the  dividends  and  surplus,  is  not  illegal,  although 
the  taxes  are  not  properly  assessed.  (Lull  v.  Anamosa  National 
Bank.  81  N.  W.  Rep.,  784.) 


PROVISION     FOR    CIRCULATION    TO    FACE 

VALUE  OF  BONDS;  FOR  BANKS  WITH 

$25,000  CAPITAL  IN  PLACES  OF 

3,000    POPULATION    OR 

LESS,    ETC. 


Extract  from  Act  of  March   14.,  igoo. 

^\^  ^k  Sif  ^if  *^g  ^f  ^^ 

*l*  ^^  ^*  *^  ^^  ^»  ^k 

Sec.  id.  That  section  fifty-one  hundred  and  thirty-eight  of  the 
Revised  Statutes  is  hereby  amended  so  as  to  read  as  follows  : 

"Section  5138.  No  association  shall  be  organized  with  a  less 
capital  than  one  hundred  thousand  dollars,  except  that  banks 
with  a  capital  of  not  less  than  fifty  thousand  dollars  may,  with 
the  approval  of  the  Secretary  of  the  Treasur}^  be  organized  in  any 
place  the  population  of  which  does  not  exceed  six  thousand  in- 
habitants, and  except  that  banks  with  a  capital  of  not  less  than 
twenty-five  thousand  dollars  may,  with  the  sanction  of  the  Secre- 
tary of  the  Treasury,  be  organized  in  any  place  the  population  of 
which  does  not  exceed  three  thousand  inhabitants.  No  associa- 
tion shall  be  organized  in  a  city  the  population  of  which  exceeds 
fifty  thousand  persons  with  a  capital  of  less  than  two  hundred 
thousand  dollars." 


31? 

•  Sec,  1 1 .  That  the  Secretary  of  the  Treasury  is  hereby  author- 
ized to  receive  at  the  Treasury  any  of  the  outstanding  bonds  of 
the  United  States  bearing  interest  at  five  per  centum  per  annum, 
payable  February  first,  nineteen  hundred  and  four,  and  any  bonds 
of  the  United  States  bearing  interest  at  four  per  centum  per  annum, 
payable  July  first,  nineteen  hundred  and  seven,  and  any  bonds  of 
the  United  States  bearing  interest  at  three  per  centum  per  annum, 
payable  August  first,  nineteen  hundred  and  eight,  and  to  issue  in 
exchange  therefor  an  equal  amount  of  coupon  or  registered  bonds 
of  the  United  States  in  such  form  as  he  may  prescribe,  in  denom- 
inations of  fifty  dollars  or  any  multiple  thereof,  bearing  interest  at 
the  rate  of  two  per  centum  per  annum,  payable  quarterly,  such 
bonds  to  be  payable  at  the  pleasure  of  the  United  States  after 
thirty  years  from  the  date  of  their  issue,  and  said  bonds  to  be  payable, 
principal  and  interest,  in  gold  coin  of  the  present  standard  value,  and 
to  be  exempt  from  the  payment  of  all  taxes  or  duties  of  the  United 
States,  as  well  as  from  taxation  in  any  form  by  or  under  State, 
municipal,  or  local  authority  :  Provided,  That  such  outstanding 
bonds  may  be  received  in  exchange  at  a  valuation  not  greater  than 
their  present  worth  to  yield  an  income  of  two  and  one-quarter  per 
centum  per  annum  ;  and  in  consideration  of  the  reduction  of  in- 
terest effected,  the  Secretary  of  the  Treasury  is  authorized  to  pay 
to  the  holders  of  the  outstanding  bonds  surrendered  for  exchange, 
out  of  any  money  in  the  Treasury  not  otherwise  appropriated,  a 
sum  not  greater  than  the  difference  between  their  present  worth, 
computed  as  aforesaid,  and  their  par  value,  and  the  payments  to 
be  made  hereunder  shall  be  held  to  be  payments  on  account  of  the 
sinking  fund  created  by  section  thirty -six  hundred  and  ninety-four 
of  the  Revised  Statutes  :  And  provided  further ,  That  the  two  per 
centum  bonds  to  be  issued  under  the  provisions  of  this  Act  shall 
be  issued  at  not  less  than  par,  and  they  shall  be  numbered  con- 
secutively in  the  order  of  their  issue,  and  when  payment  is  made 
the  last  numbers  issued  shall  be  first  paid,  and  this  order  shall  be 
followed  until  all  the  bonds  are  paid  ;  and  whenever  any  of  the 
outstanding  bonds  are  called  for  payment,  interest  thereon  shall 
cease  three  months  after  such  call  ;  and  there  is  hereby  appropri- 
ated out  of  any  money  in  the  Treasury  not  otherwise  appropriated, 
to  effect  the  exchanges  of  bonds  provided  for  in  this  Act,  a  sum 
not  exceeding  one-fifteenth  of  one  per  centum  of  the  face  value 


3i8 

of  said  bonds,  to  pay  the  expense  of  preparing  and  issuing  the  same 
and  other  expenses  incident  thereto. 

Sec.  12.  That  upon  the  deposit  with  the  Treasurer  of  the  United 
States,  by  any  national  banking  association,  of  any  bonds  of  the 
United  States  in  the  manner  provided  by  existing  law,  such  asso- 
ciation shall  be  entitled  to  receive  from  the  Comptroller  of  the 
Currency  circulating  notes  in  blank,  registered  and  countersigned 
as  provided  by  law,  equal  in  amount  to  the  par  value  of  the  bonds 
so  deposited  ;  and  any  national  banking  association  now  having 
bonds  on  deposit  for  the  security  of  circulating  notes,  and  upon 
which  an  amount  of  circulating  notes  has  been  issued  less  than 
the  par  value  of  the  bonds,  shall  be  entitled,  upon  due  application 
to  the  Comptroller  of  the  Currency,  to  receive  additional  circulat- 
ing notes  in  blank  to  an  amount  which  will  increase  the  circulat- 
ing notes  held  by  such  association  to  the  par  value  of  the  bonds 
deposited,  such  additional  notes  to  be  held  and  treated  in  the  same 
way  as  circulating  notes  of  national  banking  associations  heretofore 
issued,  and  subject  to  all  the  provisions  of  law  affecting  such  notes : 
Provided,  That  nothing  herein  contained  shall  be  construed  to 
modify  or  repeal  the  provisions  of  section  fifty-one  hundred  and 
sixty-seven  of  the  Revised  Statutes  of  the  United  States,  author- 
izing the  Comptroller  of  the  Currency  to  require  additional  deposits 
of  bonds  or  of  lawful  money  in  case  the  market  value  of  the  bonds 
held  to  secure  the  circulating  notes  shall  fall  below  the  par  value 
of  the  circulating  notes  outstanding  for  which  such  bonds  may  be 
deposited  as  security  :  And  provided  ftwther,  That  the  circulating 
notes  furnished  to  national  banking  associations  under  the  pro- 
visions of  this  Act  shall  be  of  the  denominations  prescribed  by  law, 
except  that  no  national  banking  association  shall,  after  the  passage 
of  this  Act,  be  entitled  to  receive  from  the  Comptroller  of  the 
Currency,  or  to  issue  or  reissue  or  place  in  circulation,  more  than 
one-third  in  amount  of  its  circulating  notes  of  the  denomination  of 
five  dollars  :  And  provided  further.  That  the  total  amount  of  such 
notes  issued  to  any  such  association  may  equal  at  any  time  but 
shall  not  exceed  the  amount  at  such  time  of  its  capital  stock 
actually  paid  in  :  And  provided  further ,  That  under  regulations  to 
be  prescribed  by  the  Secretary  of  the  Treasurj-^  any  national  banking 
association  may  substitute  the  two  per  centum  bonds  issued  under 
the  provisions  of  this  Act  for  any  of  the  bonds  deposited  with  the 


319 

Treasurer  to  secure  circulation  or  to  secure  deposits  of  public 
money  ;  and  so  much  of  an  Act  entitled  "An  Act  to  enable  na- 
tional banking  associations  to  extend  their  corporate  existence, 
and  for  other  purposes,"  approved  July  twelfth,  eighteen  hundred 
and  eighty-two,  as  prohibits  any  national  bank  which  makes  any 
deposit  of  lawful  money  in  order  to  withdraw  its  circulating  notes 
from  receiving  au}'^  increase  of  its  circulation  for  the  period  of  six 
months  from  the  time  it  made  such  deposit  of  lawful  money  for 
the  purpose  aforesaid,  is  hereby  repealed,  and  all  other  Acts  or 
parts  of  Acts  inconsistent  with  the  provisions  of  this  section  are 
hereby  repealed. 

Sec.  13.  That  every  national  banking  association  having  on 
deposit,  as  provided  by  law,  bonds  of  the  United  States  bearing 
interest  at  the  rate  of  two  per  centum  per  annum,  issued  under  the 
provisions  of  this  Act,  to  secure  its  circulating  notes,  shall  pay  to 
the  Treasurer  of  the  United  States,  in  the  months  of  Januar>'  and 
July,  a  tax  of  one-fourth  of  one  per  centum  each  half  year  upon 
the  average  amount  of  such  of  its  notes  in  circulation  as  are  based 
upon  the  deposit  of  said  two  per  centum  bonds  ;  and  such  taxes 
shall  be  in  lieu  of  existing  taxes  on  its  notes  in  circulation 
imposed  by  section  fifty-two  hundred  and  fourteen  of  the  Revised 
Statutes. 

*  3):  ♦  3|e  ♦  ♦  * 


THE  REEXTENSION  OF  NATIONAL  BANK  CHARTERS. 

An  Act  approved  April  12,  igo2. 

That  the  Comptroller  of  the  Currency  is  hereby  authorized,  in  the 
manner  provided  by,  and  under  the  conditions  and  limitations  of, 
the  Act  of  July  12,  1882,  to  extend  for  a  further  period  of  twenty 
years  the  charter  of  any  National  banking  association  extended 
under  said  Act  which  shall  desire  to  continue  its  existence  after  the 
expiration  of  its  charter. 

Mode  of  Re-extending  Charter. — The  regulations  of  the 
Comptroller's  oflSce  for  re-extension  of  charter  are  the  same  as  for 
original  extension  (see  pages  229-235).  The  Comptroller  should 
be  notified  sixty  days  before  expiration  of  old  charter  of  intention 
to  extend  or  to  go  into  voluntary  liquidation. 


320 

PROVISION  FOR  ADDITIONAL  RESERVE 

CITIES. 


A71  Ad  approved  March  j,  190J. 
"  That  whenever  three- fourths  in  number  of  the  National  banks 
located  in  any  city  of  the  United  States  having  a  population  of 
twenty-five  thousand  people  shall  make  application  to  the  Comp- 
troller of  the  Currency,  in  writing,  asking  that  the  name  of  the 
city  in  which  such  banks  are  located  shall  be  added  to  the  cities 
named  in  sections  fifty-one  hundred  and  ninety-one  and  fifty-one 
hundred  and  ninety-two  of  the  Revised  Statutes,  the  Comptroller 
shall  have  authority  to  grant  such  request,  and  every  bank  located 
in  such  city  shall  at  all  times  thereafter  have  on  hand,  in  lawful 
money  of  the  United  States,  an  amount  equal  to  at  least  twenty- 
five  percentum  of  its  deposits,  as  provided  in  sections  fifty-one 
hundred  and  ninety-one  and  fifty-one  hundred  and  ninety-five  of 
the  Revised  Statutes." 

For  procedure  to  secure  designation,  see  note  to  Act  March  3, 
1887,  page  186. 

The  advisability  of  National  banks  in  a  city  of  only  25,000 
population  securing  the  designation  of  a  reserve  city  is  open  to 
question.  The  matter  should  be  carefully  considered  before  appli- 
cation is  made,  especially  as  a  designation  by  the  Comptroller  can 
be  revoked  only  by  action  of  Congress — and  some  banks  located  in 
reserve  cities  with  even  larger  population  regret  that  their  city 
was  designated. 

The  reserve  cities  July  i,  1903,  are  as  follows  : 

Central  reserve  cities — New  York,  Chicago,  St.  L,ouis. 

Reserve  cities — Boston,  Albany,  Brooklyn,  Philadelphia,  Pitts- 
burg, Baltimore,  Washington,  D.  C,  Savannah,  New  Orleans, 
Louisville,  Dallas,  Houston,  Cincinnati,  Cleveland,  Columbus, 
Indianapolis,  Detroit,  Milwaukee,  Cedar  Rapids,  Des  Moines, 
Dubuque,  St.  Paul,  Minneapolis,  Kansas  City,  Kans.,  Wichita. 
Kansas  City,  Mo.,  St.  Joseph,  Lincoln,  Omaha,  Denver,  Salt  Lake 
City,  San  Francisco,  Los  Angeles,  Portland,  Oreg. 


INDKX. 


PA&E 

Accommodation  Papbr— Association  cannot  lend  its  credit 18 

AcKNowLKDGMBNT— (See  also  Oath). 

Assignment  of  bonds 290 

"  "      "      Foreign 290 

Acting  Comptroller  of  the  Currency 2 

Action— (See  also  Suits). 

Against  Association  holding  own  stock 96,  97 

Directors,  how  brought 137 

For  usury,  who  may  bring gg 

Of  replevin  ...  140 

Administrator— (See  also  Trustee). 

Holding  stock  as  such,  not  personally  liable 60 

May  act  and  sig^n  for  shareholder 190 

Advertisement— f See  Notice;  Ptiblication). 

Agency— Redemption,  in  the  Treasury 166 

Agent— Association  as  fiscal,  of  Government 61 

Examination  of  bonds 69 

Liquidating  bank 146,  155 

Reserve 80,  82,  186,  187 

Shareholder,  appointment  and  qualification  of 192 

"  Limitation  of  power 60,190 

Special,  to  examine  bank  failing  to  redeem  notes 124 

To  witness  destruction  of  circulation 76 

Aiding  Misdemeanors  of  Officers 146,  151 

Allotmf.nt— (See  Shares). 

Amendments  National  Bank  Act — Congress  may  amend 183 

Proposed  to  Act,  in  Comptroller's  rej)ort 3 

Restriction  of,  to  articles  of  association 24 

Appointment— Agent  to  examine  bonds     69 

Agent  to  witness  destruction  of  circulation 76 

Committee  to  examine  plates,  etc 72 

Comptroller 1 

Deputy  Comptroller 2 

Directors  of  associations 39-45 

Dissenting  shareholders,  committee  of  appraisal  for 179 

Examiners  of  associations 115 

Clerks  of  Comptroller's  office 2 

Officers  of  associations 6 

Receivers  of  associations 126 

Special  commission  for  preliminary  examination  of  associations 30 

Vacancies  In  Board  of  Directors 46 

Appraisal — (See  Shares). 

Articles  of  Association — Amendment  of,  for  extension  of  corporate  existence  .   .  177,  229,  235 

Amendment  of  restricted 24 

Converted  State  Bank,  execution  of,  by ()•>,  213 

Increaseof  capital  stock  by  amendment  of 31 

Lien  on  stock,  providing  for  invalid 201 

Proceedings  in  regard  to,  and  form  of  . 5,  198 

Provisions  for  elections  when  not  provided  for  in 45 

Reduction  of  capital  stock 84 

Spccificiition  of  object  of  association  in,  etc 5,37,39 

Title  and  location,  change  of 185 

Assessments— Examinations  115 

Examiner,  compensation  of 115 

Impairment  of  capital 99,  100,  175 

Plates,  engraving  of 166,  211 

Redemption  of  circulation 1C6, 167, 180,  277 

Repayment  of 176 

Reports,  failure  to  make 108 

Semi-annual  dutv 103 

Shareholder's  personal  liability 47,  126 

State  tax 105 

Tran.sportation  of  notes 166,167,180,  277 

Assessors— Shareholders,  lists  accessible  to 102 

3*1 


322 

PAGB 

Assets— Comptroller's  annual  report  to  contain,  of  associations 3 

Converting  State  banks,  wliat  available 211 

Exchange  of  property  as  sale  when  not  allowed 129 

Expenses  of  Keceiver  paid  from 136 

Failed  bank,  may  be  turned  over  to  agent 192 

Insolvent  banks,  distribution  of 133,  134 

No  withdrawal,  while  capital  impaired 36 

Of  consolidated  banks 121,  122 

Receiver  sells  on  order  of  Court 129 

Receiver  to  collect  on  failure  to  redeem  notes 126 

Reportsof  condition  to  contain  statement  of 102 

Shareholders'  agent  to  distribute 192 

United  States  have  paramount  lien  on 125 

Assignment— (See  also  Treasurer  United  States ;  Bonds  of  U.  S.). 

Executed  by  Comptroller  to  be  evidence  in  suit 163 

For  creditors 49 

Of  assets  after  insolvency,  void 138 

Registered  bonds 287,  288 

United  States  bonds  as  security  for  circulation 66,  G8 

Association— (See  National  Banking  Association). 

Attachment— Not  prior  to  final  judgment  from  State  court 160,  161 

Attorney- at-Law— Association  should  have 224 

For  Receiver 131 

Power  to  employ 16 

Auction— Bonds  of  liquidating  associations 122,  125,  180 

Enforcement  of  assessment,  impaired  capital 175 

Purchase  of  property  by  Receiver 183 

Sale  of  delinquent  National  bank  stock 28 

Sale  of  dissenting  shareholder's  stock 179 

Authority— (See  Certificate). 

B 

Bad  Debts— Charged  off,  later,  realized  on 36,  37 

Defined 98 

Bank  Circulation— (See  Circulation). 

Banking  House— Association  may  own 19 

What  constitutes •  .     20 

Bank  Note  Paper- Penaltv  for  having  unlawfully 156 

Bank  Officers— (See  OflBcera  of  Association). 

Bankrupt  Law— Not  applicable  to  National  banks 128 

Banking  Powers— (See  also  Real  Estate  and  National_Bauking  Associations). 

Accommodation  paper 12,  13 

Bonds  U.  S.,  dealing  in 9,  10 

Borrowing  money l-t 

Charter  forfeited  for  violation  of  Bank  Act 136 

Checks,  dealing  in 12 

Clearing  house  membership 9 

Commercial  paper,  dealing  in 10,  ll,  12 

Commercial  paper,  guarantee  of  association 13 

Contracts  that  are  legitimate 7 

Corporate  body,  when 29,  205 

Deposits 7,  8 

Lending  credit  not  lawful       12,  13 

Loans 8,  16,  93 

May  contract  to  repay  deposits ^   J 

Mortgages,  mav  foreclose 20,  21 

Municipal  funds,  may  receive,  pay  interest  on  and  give  bond 7 

Not  specified  not  necessarily  prohibited 7 

Principal  and  incidental . 6,  7 

Promissory  note  bankable  paper,  though  mortgage  clause 22 

Recourse,  if  property  or  deposits  stolen 8 

Real  Estate,  acquiring  excess  in  covering  debt 21 

Real  Estate,  illegal  holding,  liability 22 

Real  Estate,  mortgage  held  on  property  sold 21 

Real  Estate,  mortgage  to  indorser,  enuring  to  bank ^ 

Real  Estate,  policy  of  law  in  restrictions  on ffl 

Real  Estate,  security  on  notes  renewed 21 

Re-discounts '^ 

Stakeholder  may  act  as g 

Stocks  and  bonds,  not  deal  in 9 

Stocks  or  bonds  mav  be  taken  for  debt » 

Ultra  Vires 1° 

Banking— Limitation  of,  under  territorial  law m   oa 

Bills  of  Exchange— Discount  of 'iSI 

Illegal  transfer  of,  void ;,„   ;f? 

Penaltv  for  official  malfeasance,  relative  to 119,  I4b 

Restriction  on  loans,  not  applicable  to 93 

Restriction  on  association's  liability,  not  applicable  to 97 

Transfer  of,  to  create  a  preference,  void 1S8 


323 

PAGL 

Bills  Receivable— Rediscount  of 13 

Board  op  Directors— (See  also  Directors). 

Action  in  extension  of  charter 177 

Annual  meeting,  not  calling 4/i,  46 

Election  pustponed 46 

Number  constituting,  advantage  of  sliding  scale 41,  199 

Power  to  kiemove  president 46 

President,  power  of 40 

Provision  for 89 

Quorum,  what 41 

Three-fourths  to  be  residents  of  State 89 

Vacancy,  filling 45 

Withdrawal  of  oonds,  authorize      68 

Bonds,  Official- Agreement  to  indemnify  surety  on  attachment  bond 19 

Comptroller 2 

Deputy  Comptroller t 

Otlicers  of  associations 6,  17,  43 

Otticers  of  association  extending  charter  ....-.•..• 233 

Public  depositaries 62 

Receiver 126 

Shareholders'  agent  of  failed  bank 192 

Shareholders,  on  elec  ion  of  agent  of  failed  bank 192 

Bonos,  U.  S.— Annual  examination  of  provided  for 69 

Assignment  or  transfer  of • • 67,  68,  287,  288 

Associations  dealing  in • •  .    •  .  .  .  .    9, 10 

Association  to  be  notified  of  transfer  or  assignment .   ...      65 

Called  for  redemp  ion 296,  297 

Cancellation  of,  forfeited •  .    124 

Circulation  issuable  on    . 66,  70,  71,  181 

Comptroller,  access  to  records  of  and  deposit  with  Treasurer 69 

Converted  State  banks  to  deposit 62 

Coupons  detached  of  called  bonds 297 

Couvion,  to  be  exchanged  for  registered 67,  287,  289 

Deficiency  in  proceeds  from  sale  of,  what  first  lien 125,  141 

Defined    ...      66,  155 

Deposit  of,  required  to  begin  business 66,  70,  71,  210 

Depreciation  in  value  of,  now  made  good 69 

Duplicate  for  lost 294,  295 

Exchange  of,  permitted 70 

Extended  bank,  no  transfer  necessary 232 

Forfeiture  of,  for  failure  to  redeem  circulation 70, 122, 125 

General  provisions  respecting 69,  287 

Government  depositaries,  deposit  of,  required 61,  236 

Increase  of  deposit 67 

Interest  bearing  outstanding 297 

Interest  on,  collection  of 291 

Interest  on,  withheld  for  failure  to  make  returns  and  pay  tax 104 

Interest  on,  withheld  for  failure  to  make  reports  to  Comptroller 103 

Interest  on,  withheld  on  impaired  capitad 100 

Lost  coupon     294 

Maximum  circulation  issuable  on 181 

Maximum  amount  of  deposit  to  secure  circulation 66,  70 

Matured 297 

Minimum  amount  to  be  deposited 66,  168,  180 

Penalty  for  dealing  in  counterfeit 157 

Penalty  for  illegal  possession  of  imprint,  etc 167 

Penalty  for  passing  counterfeit 156 

Penalty  for  taking  or  possessing  impressions  of  tools,  etc 157 

Reassignment  of,  to  liquidating  bank 122, 192 

Record  of  transfer  or  assignment  of,  to  be  kept  by  Comptroller 68 

Registered,  deposited  with  Treasurer  U.  8 66 

Relation  of  deposit  to  capital 67 

Return  of,  to  association 70 

Sale  of,  for  fkiluie  to  redeem  circulation 122, 124,  125 

Taxation,  exempt  from 145 

Transfer  ot,  how  offected 67 

Treasurer  U.  S.  access  to  records  of  Comptroller  relative  to 09 

Treasurer  U.  S.  to  bold,  in  trust  for  association 67 

Withdrawcl  oi,  and  of  circulation 67, 167,  287,  290 

Withdrawal,  form  of 274 

Bookkeeper — (See  Clerks). 

BoKRowED  Money— (See  Liability  of  Association  ;  Loans). 

Branch  Banks— Chicago  World's  Fair • 191 

Concerning 79 

Converted  banks  may  retain 65 

Business— Authorization  of  association  to  begin,  when 27,210 

Place  of 79 

Suspension  of,  after  default  to  pay  circulation 124 

Business  Paper— (See  Commercial  jmper). 


324 


PAOB 

By-laws— Effect  of 45,  216 

Form  of 210 

Prescribed  by  directors  of  national  banks 6 

What  included 6,  37,  216 


Cancellation— (See  also  Bonds,  U.  S. ;  Circulation). 

Bonds  forfeited 125 

Circulating  notes 126 

Shares  of  Stock 28 

Capital  Stock— Agent  of  shareholders,  election,  distributing  assets,  etc 192,  194 

Associatiou  to  begin  business,  amount  to  be  paid 27 

Branches  of  converted  State  banks (15 

Certificate  payment  of  increase,  form 272 

Certificate  of  oflQcers  and  directors  as  to  payment  of 27,30 

Certificate  of  payment,  form 271 

Certificate  of  reduction,  form 273 

Character  of 222 

Circulation  not  to  be  used  to  create 98 

Circulation  proportion  to 70-72,  180,  181 

Collateral  security  for  deposit 3-4 

Compensation  of  examiners  based  on,  except  in  certain  cases 115 

Consolidating  banks 122 

Conversion  of  State  banks 62 

Creditor's  bill  against  shareholders 173 

Deposit  of  United  States  bonds  based  on 66, 168 

Directors,  individual  liability  on 136 

Directors,  qualification  of 39 

Distinguished  from  shares  of  stock 105 

Dividends  additional,  and  net  earnings  to  be  reported 103 

Dividends,  and  creation  of  surplus 102 

Dividends,  when  prohibited 98 

Disposition  of,  delinquent  shareholders 28, 176 

Division  of,  into  shares,  number,  value  and  transfer 24,  25 

Enforcing  individual  liability  by  receiver •  .   .  .    173 

Enforcing  payment  of  installments,  or  receiver 28, 173 

Failure  to  dispose  of  shares,  purchased  or  acquired 28,  96 

Holders  of  shares,  preference  in  extended  banks 177 

Holding  of  shares  required  by  directors 39 

Impairment  of,  assessment  for 99, 175 

Impairment,  appointment  of  Receiver 100,  136 

Increase  not  made,  sul>scribers  may  recover 33 

Increase  not  required  by  increase  of  population 23 

Increase  of,  provisions  for 31,  32,  52, 184 

Increase,  subscribers  bound  though  amount  reduced 33 

Increase,  subscribers  equity  if  net  full 34 

Individual  liability  of  shareholders 47 

Legal  status  before  payment  for 29 

Ldabilities  of  an  association  not  to  exceed  and  exceptions 97 

Liquidation,  two-thirds  of  stock  may  vote 118 

List  of  shareholders  to  be  sent  the  Comptroller 102 

Loans  on  not  restricted  by  circulation 97 

Loans  on  security  of  shares,  prohibited 96 

Loans  restricted  to  10  per  cent,  of 93 

Minimum  amount  required  of  national  banks     23 

Minimum  of  bonds  to •  180 

Number  of  shares  and  amount  in  organization  certificate 5 

Payment  of,  provisions  for  and  limit  in  time 27,  28,  29 

Eeduction  of,  provision  for 34,  35,  36 

Reduction  to  cover  impairment 36 

Relation  of  bond  deposit  to 67 

Resolution  to  increase,  form 271 

Resolution  to  reduce,  form 272 

Restoration  of,  when  below  the  minimum  required 88 

Savings  and  other  banks  in  District  of  Columbia  subject  to  this  act  ...    176 

Set  free  by  reduction,  shareholders  pro  rata 36 

Set  free  by  reduction  used  as  surplus  or  Comptroller  require  as 36 

Shares,  fractional  may  be  issued 35 

Shares,  personal  property 24 

Shares  of  acquired  for  debt  to  be  disposed  of,  when 96 

State  banks  converted  the  same,  as  prior  to  conversion 148 

State  taxation  of  shares  of      105 

Shareholders'  rights,  duties,  liabilities,  etc.— (Sec  Shareholders). 

Subscriptions  to,  when  jiayable 28,  29,  208 

Surplus  fund  to  be  created  to  20  per  cent,  of 92 

Surrendered,  no  claim  on  collateral  of  bad  debts 86,  87 

Tax  on  repealed 188 


325 

PACB 

Capital  Stock— When  increase  of,  becomes  valid 31 

Witlidrawal  of  bonds  on  reduciion,  or  closing  business 67 

Withdrawal  of  bonds,  limited 70 

Cashier— (See  also  President ;  Officers). 

Appointment  of 6 

Authority,  exceeding 44 

Bank  examiner  may  examine  on  oath 115 

Bond  assignments  by 67 

Borrowing  money,  limited  in 14 

Certificate  of  officers  and  directors 29,80,208 

Certificate  of  stock  payment 27,  2S 

Circulating  notes,  to  sign 71,  7i,  75 

Commission,  cannot  offer,  for  securing  deposits 15 

Customers'  credit,  responsibility  for 15 

Deposits,  special 7,  8 

Embezzlement  by 146 

Examiner  of  own  bank,  cannot  be •  115 

Expiration  of  corporate  existence,  certification  by 180,235 

Extension  of  corporate  existence,  certilication  by 177,  230,  232 

False  certification  of  checks 101,  15J,  182 

Guarantee  of  payment,  limit  in     15 

Incomplete  circulation,  bank's  liability  for,  without  signature 191 

Increase  of  stock,  ct^rtification  of 31 

Liquidating  bank,  duty  in 118, 119, 120, 121,  227 

Loans  on  U.  8.  or  national  bank  notes  unlawful 146 

Organizing,  duties  in 27 

Penalty  for  countersigning  notes,  when 146 

Penalty  for  issuing  circulation  of  expired  associations 157 

Penalty  for  official  malfeasance 146 

Penally  for  pleilging,  etc.,  circulation 146 

Penalty  for  authorized  receipt  of  public  money 158 

Personal  receipt,  binding 17 

Position  of        222 

Protest  of  circulation,  waiving  notice  of 123, 124 

Proxy,  not  to  act  as 37 

Reports  of  condition,  verified  by 102,248,256 

Reports  of  earnings  and  dividends,  verified  by 103 

Shareholders,  list  of,  by 102 

Taxable  circulation,  returns  by 104 

Unauthorzied  circulation,  returns  by 173 

Voluntary  liquidation,  certified  by 120,  227,  228 

Central  Reserve  Agents— (See  Reserve  agents). 

Cbrtificatb  —  Certified  copy  of  organization,  evidence 163 

Comptroller's  authority  to  begin  business 30,  210 

Converted  State  banks 62 

Deposit  of  public  money 240 

Destruction  of  notes 76,123,125,126 

Execution  of  organization 6 

Extension  of  corporate  existence 177,230,232 

Increase  of  stock 31,52 

May  be  withheld,  when 30 

Officers  and  directors 30,  208 

Organization     5 

Payment  of  installments  of  stock 27 

Publication  of  Comptroller's  authority 31,211 

Reduction  of  stock 34 

Sealed,  of  Comptroller,  evidence 163 

Voluntary  liquidation 120,  227,  228 

Certification  of  Checks— When  criminal 154 

When  forbidden  and  penalty  for 101, 182 

Certified  Copies— (See  Evidence). 

Charter  Number— Of  circulating  notes  to  be  printed  on 168 

Charter— (See  Corporate  Existence). 

Chattels— As  security  for  loans 9 

Checks- Dealing  in 12 

False  certification  of,  Receiver  appointed 101 

Falsely  certified,  an  obligation  of  association 101 

Penalty  for  false  certification  of 182 

Circulation— Association,  Issuing  .      6,  66,  209,  278 

Association  to  redeem,  in  lawful  money  on  demand 81,  122,  165 

Bonds  U.  S.  to  secure 67-70,  168,  210 

Bonds  in  excess  of  amount  required  and  interest  to  secure  may  be  with- 
drawn    67 

Bonds  forfeited  when,  dishonored 69,  124 

Certificates  of  destruction 76,  77 

Charter  number  on 168 

Collection  of  tax  on 104 


326 


PASS 

CiRCxn-ATiON    Consolidating  banks 121, 122 

Cost  of  engraved  plates  to  be  paid  by  association 72, 166,  179,  211 

Cost  of  redemption  and  transportation '. 167,181,^7 

Counterfeiting,  etc 155,  157 

Countersigning  unlawfully 146 

Destroyed,  to  be  replaced  by  new  notes 76 

Examination  of  bank  upon  protest  of 124 

Expense  of  plates  lor  notes  of  extended  banks 179 

Extended  bank,  shall  differ  from  prior  issue 179 

Form,  denomination,  printing  and  signing 70,  71,  73,  179 

Form  of  order  for 210 

For  what  receivable 75 

Fraudulent  notes  to  be  stamped 175 

Gaiu  from  lost  and  destroyed 179 

Government  depositaries  to  receive,  at  par 61 

Inscription  on 71 

Increasing  capital  stock,  by  prohibited 98 

Liquidating  bank  to  deposit  lawful  money  to  redeem 122 

No  limit  on  aggregate  amount 171 

Notice  of  redemption,  to  be  forwarded  to  bank 165 

Other,  prohibited  for  national  banks 76 

Penalty  for  failure  to  make  returns  of,  for  tax 104 

Pledging,  as  security  jirohibited 98 

Preparation  of 71 

Profit  on  unredeemed,  inures  to  the  United  States 179 

Proceedings  when  return  is  not  made  by  State  banks 144 

Prohibition  against  circulating  uncurrent  notes 100,  101 

Proportion  to  Donds  deposited 180,  181 

Proportion  to  capital 67,  181 

Protest  of 123 

Receivable  at  par  by  all  national  banks 83 

Reduced  if  bonds  withdrawn 70 

Refunding  excess  tax 104 

Redeemed  of  closed  bank  to  be  canceled 126 

Redeemed,  disposition  of 278 

Redemption  fund  of  5  per  cent 165 

Redemption  of,  in  United  States  notes  and  expenses 166-167,  100,  275 

Redemption  ot  extended  bank 179 

Redemption  of,  liquidating  banks 123 

Redemption  of  closed  banks 122, 125,  126,  190 

Redemption  of  incomplete 191 

Re-issue  of 76,  166 

Restriction  of  tax  provisions 146 

Statement,  of  closed  banks  in  annual  report  of  Comptroller 3 

Securities  exempt  from  local  taxation 145 

Tax  on 103-105, 144,  279,  280 

Tax  on  converted  bank 143 

Tax  on  insolvent  banks  remitted 176 

Tax  on  State  bank  issue 143 

Tax.subject  to  State  law 113,191 

Treasurers  and  pTiblic  depositaries  to  return,  of  closed  banks ]67 

When  exempt  from  tax 143 

When  issuable  as  money 75 

When  withdrawn,  new  issued  onlv  after  six  months 181 

Withdrawal  of,  by  depositing  lawful  money 70,  121,  122,  168,  181 

Worn  out  or  mutilated,  destroyed 76,  170 

Claims— (See  Insolvency ;  Receiver  >. 

Clearing  House— Certificates  issued  by,  counted  as  reserve 81 

Membership 9, 182 

Clerks— Appointment  of,  Comptroller's 2 

Duties  of,  fixed  by  the  Comptroller 2 

Employment  of,  for  the  Bureau  by  the  Comptroller 2 

Names  and  compensation  of,  in  annual  report 3 

Of  Association,  not  act  as  proxy 37 

Of  Association,  qualifications 224 

Closed  Associations— (See  Insolvent  banks). 

Collaterals— Care  of 224 

Of  insolvent  banks ,  134 

Shares  registered,  held  as 53 

Stocks  and  mortgages 10,  20,  21,  22 

Collections— Association  authorized  to  make 7 

Cashier  on  savings  bank 17 

Commercial  Paper- Association  indorsing 18 

Discotmt  of 83,  97 

Guaranteeing  payment  of 13 

Purchasing 10 

Commission— Paying  to  get  customer 15 


327 

FAOS 

CojirxROLLBK  OP  THB  CuRRBNCY— Action  as  to  agent  of  shareholders IVi 

Agent  special,  for  association  failing  to  redeem  circula- 
tion   124 

Annual  report  to  be  made  to  Congress  by 3 

Apix)intmenf ,  term  and  salary-  ol 1,  2 

Approve  Receiver's  jjurcliasu  of  property 184 

Approve  reserve  agent    .   .  fcO 

Articles  of  association  and  organization  certificate  to  be 

filed  with 5 

Authorized  to  examine  banks  in  the  District  of  Co- 
lumbia         8 

Bonds  and  records  of  with  Treasurer,  access  to 60 

Bonds,  sale  of,  by 125 

Capital  stock,  increase  or  reduction  of,  approved  by  .  81,  34 

Certiticate  to  begin  business 30,  210 

Certified  copies  of  organization    certificate,   etc.,  evi- 
dence   163,  164 

Charter  number  of  bank  to  have  put  on  notes 168 

Cited  in  injunction  of  Receiver 136 

Circulation,  duties  as  to 70,  71,  76,  80,  126,  166 

Commissioner  of  Freedmen's  Savings  Bank 1 

Creditors  of  failed  banks  pay  dividends  to 133, 136 

Decision  of  insolvency  final 127 

Destroy  circulating  notes  by  maceration 170 

Duties  of 1,2 

Enforce  stockholder's  liability 126 

Enjoined  by  bank,  how 163 

Examiners,  appointment  of 115 

Extension  of  corporate  existence,  approved  of,  by  .  .   .    177 

Evidence  sealed  certificates 163 

Forfeit,  cancel  or  sell  bonds  of  notes  not  redeemed  .  .  .    125 

Forfeiture  of  charter,  suit  to  be  brought  by 136 

Gold  banks,  organization  of 77 

Interest  in  National  banks,  issuing  currency  prohibited      2 

Jurisdictiouof  circuit  courts * 159 

Liquidation  of  Association  to  be  approved  by  ...  .  120,  226 

Not  compound  debts  of  National  banks 129 

Notice  to  banks  short  in  reserve 80 

Notice  to  creditors  of  insolvent  banks 133 

Oath  to  be  taken  and  bond  to  be  given  by 2 

Pay  for  Receiver's  purchase  of  property 184 

Pays  residue  of  assets  to  shareholders 133,  192 

Plates  and  dies  and  examination  of 3, 72 

Printing  report  of 4 

Qualification  of 2 

Re-appraisal  of  stock  in  failed  bank 179 

Receiver,  appointed  by 80,  99,  101, 126,  173 

Receiver,  may  remove 127 

Reports  of  savings  banks 175 

Reports  to  be  made  to 102, 103,  244 

Reserve  cities,  designation  of,  by 186 

Retiring  circulation 181 

State  banks  converted,  approved  by 62 

Title  and  location,  change  of,  to  be  approved  by  ...   .    185 

Title  of  National  banks,  approved  by 5,  1% 

Transfer  of  bonds 67,  68 

Computation— Of  reserve  and  rules 258,263 

Compounding  Debts— Of  insolvent  bank 129 

Congress— Comptroller's  report  to  be  made  to 3 

Consolidation  of  Associations— Provisions  for  and  suggestions 121, 122 

Contract— Effect  of  asury  upon 99 

Liquidating  banks  cannot  make 118 

Rights  and  liabilities 6,  18, 19 

Converted  State  Banks— (See  State  Banks  Converted). 

Corporate  Existence— Extension  of 177,  229 

Liq\iidaling,  not  terminate 119,  J80 

Corporators  op  National  Banks — May  act  by  attorney 20-1 

Minimum  number 6 

To  be  natural  persons 107 

Women  as 198 

Corporate  Powers — (See  Banking  Powers). 

Corporation — Association  becomes,  when 6,  29,  206 

Cannot  be  organizer  of  National  banks 197 

Cost— (See  Expenses). 

Counterfeits— Making  or  using  notes,  plates,  tools,  etc 155,157 

Stamping  • 175,  286 

Coupon  Bonds— (See  Bonds,  United  States). 

Courts— (See  also  crimes,  jurisdiction,  etc). 

Federal  jurisdiction  in  insolvent  bank  suit 180 


328 


PAon 

Courts— Jurisdiction  of 159, 178, 187 

May  enjoin  Comptroller  and  Receiver 135,  159 

State  jurisdiction  in  insolvent  bank  suit 130 

Credit— Lending  by  association 13 

Creditors— Checks  falsely  certified  valid  against  associations 101 

Defrauding 49 

Directors'  liability 136 

Expiration  of  existence,  notice  to 180,234 

Insolvency,  notice  of,  to 133 

Non-payment  of  circulation,  notice  of,  to 124 

Of  failed  banks  must  proceed  through  Comptroller 133,  136 

Payment  of  assets  of  failed  banks 133,134 

Preferred,  when  and  when  not 110,  125,  138, 139 

Procedure  against  association 57,  173 

Rights  not  to  be  impaired 24,  56 

Shareholders'  agent,  settlement  with        194 

Shareholders'  list  of,  subject  to  inspection  by 102 

Shareholders'  personal  liability  of,  to 47,  56 

Voluntary  liquidation,  notice  of,  to 120 

Creditors'  Bill— Against  shareholders 178 

Crimes,  Jurisdiction,  etc.— Counterfeiting  circulation 155 

Dealing  in  counterfeit  circulation 157 

Evidence,  certified  copy  of  organization  certificate 163 

Evidence,  sealed  certificate  of  Comptroller  competent ....    163 

False  certification  of  checks 101 

Having  or  taking  unauthorized  impression  of  tools,  etc.  ...    157 

Illegal  possession  or  use  of  material  for  circulation 165 

Imitating  circulation  for  advertising  purposes 78 

Improper  countersigning  or  delivering  circulation 146 

Indian  Territory 190 

Issuing  circulation  rf  expired  associations 157 

Jurisdiction,  general,  of  National  bank  cases 159,  178,  187 

Jurisdiction  to  enjoin  Comptroller  or  Receiver 135,  159 

Mutilating  circulation 78 

Obligations  of  the  United  States  defined      155 

Ofiicial  malfeapauce 146 

Passing  counterfeit  circulation •    156 

Pledging  United  States  notes  or  bank  circulation 146 

Suits  against  United  States  officers  or  agents 163 

Criminal  Intent — Must  be  shown  against  bank  officers 146,  154 

Currency— (See  Circulation,  Gold  Certificates,  Silver  Certificates,  Lawful  Money,  United 
States  Notes). 

GuRRENcv  Bureau— Designation  of  officer  of  Comptroller  of  the  Currency 1 

Offices,  vaults,  etc.,  for 3 

D 

Dealing— In  commercial  paper 10 

In  real  estate 

In  stocks  and  bonds 9 

U.  S.  bonds 9 

Debentures -Of  mortgage  loan  companies 21 

Debts— Compounding 129 

Real  estate  held  for ... 19 

Deceased  Shareholders — Estate  liable 48 

Definitions — Bad  debts 98,  99 

Banking  powers 6,  7 

Greater  rate 108 

Lawful  money  and  legal  tenders 194 

National  banks 66 

Obligations  of  United  States 66,  155 

Denominations— Circulation  of  National  banks 71 

Converted  State  bank  shares 62 

Gold  certificates 182 

Shares  of  National  bank  stock 24,  62 

United  States  note  certificates 81 

Depositaries- (See  Government  Depositaries.) 

Depositors— Loaning  for 17 

Otiiccrs  cannot  contract  to  procure 15 

Dbposits— After  bank  insolvent 140,  141 

Kind  allowed 7,  8 

PuVjUc  moneys 61,  236 

Replevin,  set  off,  etc 58, 140,  141 

Reserve  to  be  kept  on 80 

Shares  as  collateral  for 34 

Special,  liability  for 8 

Tax  on,  repealed 188 


329 

Dbpdty  Comptroller— Appointment,  bond,  oath,  duties,  salary 2 

Interest  in  bank  issuing  National  currency  prohibited 2 

DeiTruction  OF  Mutilated  Notes— By  maceration 170 

On  deixjaitoflawful  money 123,167,  181 

Dibs— (See  Plates  and  Dies.) 

Directors— (See  also  Board  of  Directors). 

Association  to  elect  or  appoint 6,  39,  40 

Assessment,  provisions  lor  enforcement  of,  by 176 

Attestation  of  reports  to  Comptroller,  by 102 

Borrowing  mouev,  must  authorize 14 

Capital  impaired,  duty  in 28,  100, 176 

Certificate  of  olhcers  and 30,  208 

Certification  of,  to  extension 177 

Comptroller,  special  instructions  to 274 

Conversion  of  State  bank,  action  by 62 

Deposits,  personal,  withdrawing  in  crisis 43 

Deposits,  special  liability  for 43 

Disqualification  and  resignation 42 

Dividends,  declaration  of,  by 92 

Election  and  qualiiicatiou  of 39,40 

Embarrassment  of  bank,  when  may  conceal 43 

Embezzlement,  penalty 146 

Estate  of,  liability 137 

Exception  in  Oklahoma 190 

Failed  bank,  duty  in 132 

Failure  to  hold  annual  election 46 

Forfeiture  of  charter  for  violation,  etc.,  by 136 

In  bank  action  against,  for  usuriotis  loan 92 

Individual  authority  only  as  delegated 41 

Indian  Territory,  relative  to 190 

Leave  of  absence 42,  44 

Liabilitv 36,  42, 163 

Liability  in  reports  to  Comptroller 136,  150 

Names  and  residences  of,  to  be  ascertained  by  Comptroller 30 

Naming  in  articles 200 

Not  an  examiner  of  own  bank 116 

Number  and  election  of 39 

Oath  of 39,  206 

Oath,  le.gal  force  of 40 

Office  of 222 

Officers  of  association 38,115,149 

Officers'  term,  control 16 

Oklahoma,  qualification  of  National  bank  in 190 

Penalty  for  issuing  circulation  of  expired  association 157 

Penalty  for  official  malfeasance 146 

Penalty  for  unauthorized  receipt  of  public  money 158 

P*resident  of  board,  to  be  a 46 

Powers  of 6,  18,  39-45 

Proxv,  cannot  act  as 38 

Qualifications  of 39 

Real  estate  conveyance 20 

Representative  holders  of  stock,  not  eligible  as  such S9 

Resolution  of,  assignment  of  registered  bonds 274,289 

Should  require  bonds  of  officers 43 

Shareholders  dissenting  to  extension,  notice  to,  etc 178 

Stock,  must  hold  free  from  pledge 40 

Stock  registered  in  name,  liable  for 60 

Suit  against,  for  neglect,  etc 1S2 

Supervision  of  aflairs  of  bank  required 42,  43 

Vacancies  in  board  of        45 

When  refuse  to  declare  dividends 93 

Women  when  eligible 39,  40 

Discounts — (See  also  Loans,  Liability,  Interest.) 

Bills  of  exchange,  when  not  usurious 83,  84 

Include  purchase| , 12 

Prohibited,  when  reserve  deficient " 80 

Rate  of  interest  that  may  be  charged 83,  84 

Suggestions  as  to  making 223 

When  embezzlement 148 

With  attorney  fee  clause 87 

With  mortgage  clause 22 

Distinctive  Paper— Unauthorized  possession  or  use  of  _ 155 

District  Attornets — To  conduct  suits  against  associations 163 

District  OP  Columbia— Examination  of  and  requirements  of  banks  in 3,175 

Supervision  of  banks  in,  by  Comptroller  3 

Disbursing  Funds  op  U.  S,  Officbrs— Depositing  with  National  bank  depKJSitarles  ....    237 

Dividends— (See  also  Surplus). 

Comptroller  to  make  ratable,  of  assets  of  insolvent  banks 133 

Directors  to  declare 92,  9  J 


330 

«  PACB 

DiviDKNDS— Earnings  and,  to  be  reported     ino 

Explanations  of  items  in  report  of 263 

Form  of  report 266 

Limitations  on '  .' 80  98  99 

Of  failed  associations      .'.'.'.".'. 133  igo 

Penalty  for  failure  to  report  earnings  and '  loa 

Pledge  from  shareholders 9g 

Restriction  on  association's  liability .'  ] 07 

Donation— Officers  cannot  bind  bank ?« 

Drafts— Binding  banli  to  pay !.'!'.' 16 

Obligations  of  United  States,  including   .".'.'.'."".* IBs 

OflQcial  malfeasance {ac 

Liability  of  association,  relative  to .  ! 07 

Penalty  for  mutilating '  ' 70 

U.  S.  Treasury,  indorsement  of '. 000 

DuTiEs-(See  Tax).  ^'^ 

E 

Earnings,  Net— (See  also  Dividends). 

Must  be  reported lOj 

What  constitutes  .      '...'.'.'.''     (m 

Elections— Corporate  powers .'.'.'.'.''"''       6 

Directors    .   .  .  .      .'.".'.'.'.'.".'.".'.'     6  39 

Extension  of  corporate  existence '...'.'.. 177 

Failure  to  hold  annual 45 

Increase  of  stock 3j 

Proceedingsin  ■.■.'.■.■.■.■.■.  ■.37,*39,  206 

Rightsof  shareholders  in •  ■     37 

Reduction  of  stock .'.*.'.'.'  34 

Shareholders'  agent '.'.'.'.'.'.'.'.'.'   192 

Voluntary  liquidation ,.....'."'  ilS  120 

EMBBZZLEMENT—(See  also  ("rimes).  •  •  •  •       , 

Indictment  what  must  show  and  penalty 153 

Misapplication  of  funds,  etc.,  penalty .."..'       146 

Must  be  shown 147 

Unauthorized  receiving  public  deposits '..'..'.'..    158 

When  action  under  State  laws "...  isi   162 

Engraving— (See  also  Circulation  Plates  and  Dies).  •       •   •       , 

Plates,  banks  to  pay  for 166 

Enjoining  Comptroller  AND  Receiver— (See  Injunction  of  Comptroller). 

Estoppel— In  Receivership 136 

On  plea  of  charter,  void 57 

Evidence— Certified  copies  of  organization  certificate '.    163 

Copies  of  papers  certified  by  Comptroller .163 

Examinations— Annual,  of  bonds 69 

Bonds  and  records,  provisions  for 69 

Comptrollerof  banks  in  the  District  of  Columbia 3 

Examiners  to  make,  and  expense 115 

Extending  charter 177 

Limitation  of  visitorial  powers 116 

List  of  shareholders  subject  to 102 

Ofbankbybank  officers 224 

Plates  and  dies  annually 72 

Preliminary,  to  beginning  business 30 

Special,  of  extended  associations 177 

Examiners— Appointment,  compensation  and  qualifications 115 

Not  an  officer  of  bank  examined 115 

Special  commission 30,  124,  177 

Exchange  of  U.  S.  Bonds 67,  70,  287,  289 

Execution— (See  Suits). 
Executor— (See  Trustee). 

Expenses— Bureau  of  Comptroller,  to  be  stated  in  annual  report 3 

Circulation,  default  on 126 

Circulation,  tax  on 103 

Circulation,  transportation  and  redemption  of 76,167,181 

Duties  of  shareholders'  agent  relative  to 194 

Examiner US 

Extend  charter  examination 177 

Extending  charter,  dissenting  shareholders'  stock 179 

Examinations,  in  District  of  (^olumbia 3 

Plates  and  dies 166,  167,  179,  211 

Plates  and  dies,  examination  of 72 

Receivership  and  how  paid 126,136 

Receivership,  paid  prior  to  election  of  shareholders' agent 194 

Reappraisal  dissenting  stock  in  charter  extension 1'79 

Sale  of  bonds 125 

Sale  of  delinquent  stock 28,175 

Transportation  of  notes,  etc 166,  167,  277 


331 

PAoa 

jiOCPiRiNG  Associations— Procedure  to  close 180,  286 

ExPRKSs  CHAKGEs-Natioual  bank  uotes,  U.  S.  coin  and  currency 284 

Express  Company— Government  contract  with 884 

E);tknsion  op  Cokpokatb  Existbnch— Amendment  of  articles  and  forms 177,  229,  230 

Circulation  of  old  and  new 179 

Continues  identical  association 178 

Procedure  in       177,  229 

Rights,  liabilities  and  restrlctionfl 177,  229 

Shareholders  not  voting  for 233 

When  better  to. reorganize 233 

P 

PAii.tRK—(See  Insolvency). 

Fai-se  Entry— Definition • JJ" 

Indictment,  what  must  show • 15^» 

Penalty  for,  ollicial  malfeasance 146,  147 

When  and  when  not       148,  149 

Federal  Courts— Enjoining  banks IJj'^ 

Transfer  of  suit ,Va  I'o-;   1^ 

What  cases  jurisdiction 160,187,  l.sj 

Federal  Questions— Concerning  National  banks 188,  189 

Fees— (See  also  Examiners  ;  Receivers). 

None  for  witnessing  assignment  by  U.  S.  minister,  etc ^1 

Protesting  circulation  of  bank 123 

Protest  failed  bank,  responsibility i* 

Fine— (See  Penalty). 

Firm— (See  also  Liability  of  Association). 

Limit  in  loans ,•  •  •• ,?X 

Five  Per  Cent.  Redemption  Fund— Excepted  from  lawful  money  deposits 190 

Ledger  account 277 

Redemptions  on 165,  WS 

Regulation  of '^5 

Remittances  for 276 

Fisc/.L  Agent— (See  Agent ;  Government  Depositaries). 
FoRFEiTURE-(See  Interest;  Bonds;  Charter;  Suits). 
Forgery— (See  Crimes  ;  Penalty). 

Forms— Articles  of  Association oct   ion 

Bonds,  U.  S.,  letter  for  conversion  of  coupon ■»'.  •^J 

Bonds,  power  of  attorney  to  assign |^JJ 

Bonds,  resolution  of  directors  to  assign •^'^•1 

By-Laws i^'V 

Capital  stock,  certificate  of  payment -'' 

Capital  stock,  resolution  of  increase f±\ 

Capital  stock,  certificate  of  payment  of  increa.se -{^^ 

Capital  stock,  resolution  to  reduce f')- 

Capital  stock,  certificate  of  reduction ;^7^ 

Circulation,  order  for         o,;    55o 

Corporator,  agent  signing  for '^^''*«  ^f^ 

Directors,  naming  in  articles ^, 

Directors,  oath -* 

Expiration  of  charter,  closing ^^ 

Interest  on  bonds,  power  of  attorney  to  collect       ^ 

Interest,  resolution  of  directors,  attorney  to  collect ^'^ 

Organization  certificate 202 

Organization,  notice  of  intention ijj^ 

Organization,  indorsement  of  applicalion i^^ 

Officers  and  directors,  oath  of oei   ocr 

Reserve  computing *°^'  f^'i 

Subscription  paper '^^ 

Title  of  association ixi 

"Voluntary  liquidation,  resolution  for ^^ 

Voluntary  liquidation,  notice  to  creditors ^-8 

Fractional  Silver  Com— Issue  of ^'■ 

Franchise— (See  Corporate  Powers ;  Violation  of  National  Bank  Act). 

Fraudulent  Notes— United  States  and  National  bank  officers  to  stamp no 

G 

GARNisHEK-Liquidatingbank  as,  of  depositor 119 

Gold  Banks— Laws  governing • '' 

GoldCbrtificatbs— Deposit  for,  issue  limitation  and  denomination i»^ 

Reserve  for  national  banks 18^ 

GoveknmentContract— For  transportation  of  moneys ^\   ^ 

Government  Depositaries- Deposit  and  withdrawal  of  public  moneys 5V  ooS 

Deposits  by  postmasters ?,'  ^ 

Designation  and  duties  of '  „?f 

National  banks  as 61,  2.50 


332 

PAGB 

GovBRNMHNT  Dbpositaribs — National  bank  circulation  to  be  received  by 61 

National  banks  as  fiimncial  agents  of  the  Government  ...     61 

Penalty  for  misapplication  of  money-order  funds 238 

Penalty  for  unauthoriiied  deposit  ot  public  moneys  ....  238 
Penalty  for  unauthorized  receipt  or  use  of  public  moneya  .   .   238 

Secretary  of  the  Treasury  to  designate 61,  236 

Securities  to  be  depositea  by 61,  236 

Greater  Rate— In  State  taxation,  defined 108 

Guardian— (See  Trustee). 

GuAKANTKE— Paper  by  association 13 

H 

Hand  Bills— Imitation  of  national  bank  notes,  penalty  for 78 

Hypothecation— (See  Pledging). 


Impairment  OF  Capital— To  be  made  good 99,100,175 

Imports.  Interest  on  Public  Debt— Circulation  of  national  banks  not  receivable  for    .   .     75 
Incidental  Powers — (See  also  Banking  Powers). 

Of  associations 6,  7 

Incomplete  Currency— (See  also  Circulation). 

Associations  liable  for 191 

Issumg 278 

Redemption  of 191 

Unlawful  countersigning  or  delivering 14t> 

IncreaseofCapitalStock— Procedure,  rights  of  shareholders,  etc 81,82,52,184,27-1 

Indebtedness— Of  association,  limit  on 97 

To  association,  limitation 93 

Indian  Territory— National  bank  act  in  effect  in 190 

Individual  Liability — (See  Liability). 

Indorsement— Of  Treasury  drafts 298 

Infant — Liability  on  stock  of 56 

Injunction— (See  also  Comptroller ;  Suits). 

Not  to  issue  before  final  judgment • 161,  l?i 

Of  Comptroller  .  1„ 

Insolvbncv— (See  also  Liquidation  and  Receivership). 

Acts  and  proceedings,  contemptatiiig  void 138 

Agent  ot  shareholders 192 

Assets,  distribution  of  and  transfer  of 133-135,138 

Circulation  issued  after,  penalty  for 157,  158 

Claims  against  association 126 

Claims  not  allowed  by  receiver 135 

Claims  for  tort 134 

Collaterals •  .   .    134 

Compounding  debts 129 

Comptroller's  decision  final 126 

Creditors,  notice  to       133 

Creditors,  preference  of 138,  139 

Creditors'  procedure 57 

Defined 138 

Directors,  duty  in 132 

Impairment  of  capital 99,  100,  175 

Jurisdiction  of  cases 159,  187 

Liability  of  registered  stock 53,55,57 

Lien  of  U.  S.  on  assets,  what 134 

Proof  of  by  return  of  execution 127 

Receiver,  appointment  of,  etc 99, 126, 173,  189 

Redemption  of  circulation 107 

Set  off 141,  142 

Shareholders  may  manage  liquidation 192 

State  statutes  applying  to 112,  142 

Suit  for  and  against  receiver 130 

IMTERBST— (See  also  U.sury). 

Checks  for,  of  U.S.  Treasurer 293 

Claims  against  failed  banks 133 

Collection  of,  on  U.  S.  bonds,  form  of  power  of  attorney 293 

Collection  of,  on  bonds  with  Treasurer 69,  70,  291 

Forfeited,  when    .      87 

How  paid  to  joint  holders  of  U.  S.  bonds 293 

Legal  rate,  of  national  banks 83,  84 

Of  rediscounts,  action  for  usurious 87 

On  bonds  held  by  minors 293 

On  bond  deposit  and  when  withheld 69,  lOO,  104 

Penalty  for  usurious 86 

Public  debt  not  payable  in  national  bank  notes 75 

Eenewal  notes,  usiirious 87 


333 


PA08 


Intbrkst— State  law,  relative  to 83,  84 

llnlavvful  paymeuts 85 

Internal  Revenue— Remission  of  tax  against  Insolvent  banks 176 

Semi-annual  return,  ol"  taxable  circulation  other  than  national  ...  144 
War  Revenue  Law S'X) 


Judgment— (See  also  Suits). 

Appointment  of  Receiver  for 178 

Assigning H 

Final  in  State  Court  before  certain  proceedings 161, 162 

For  usury  when  allegations  suflicieut 88 

Illegal  preference  of  creditors 138 

Purchase  of  real  estate  under- 19 

Judgment  Notes— Discount  of 22 

Jurisdiction— (See  also  Crimes,  Jurisdiction,  etc.). 

•^  Of  courts 159,  187 


Lakceny— (Bee  Crimes,  Jurisdiction,  etc.). 

Lawful  Monkv — Defined 194 

Deposit  to  reduce  circulation 181 

Exemption  of  circulation  from  taxation  when  deposited 143 

Expiring  associations  to  deposit 180 

Extended  bank  to  deposit 179 

Five  per  cent,  fund 165,  166,  276 

Forfeiture  of  bonds,  for  failure  to  redeem  circulation  in .  .    124 

Liquidating  associations  to  deposit 121, 122,  180 

Liquidating  association,  consolidating 121 

National  bank  notes  redeemable  in 83 

Payment  of  protested  circulation  in 124 

Protest  of  circulation,  for  failure  to  redeem  in 123 

Redemption  account,  disposition  of 190 

Reserve  to  be 80,  81 

Withdrawing  circulation,  by  deposit  of 167 

Lawful  Monbt  Reserve— Balances  with  agents 81,  82,  180,  187 

Clearing-house  certificates 81 

Computing,  examples  of  short  methods 2t"i7-270 

Computing,  forms  for 265,  266 

Computing,  rules  for 259,  264 

Gold  and  silver  certificates 182 

Five  per  cent,  fund 105,166,  275 

Lawful  money  in  bank,  what  counts  as 80,  81 

Maintenance  of 80 

On  what  required 8o,  105,  257 

Receiver  for  failure  to  maintain 80,  173 

Regulations  of 257-264 

Reserve  agents,  proportion  with 80 

United  States  note  certificates 81 

Leave  op  Absence— Directors '^\ii 

Liability— Action  against  Directors 1^7 

Association's,  for  ple<lging  circulation,  etc 146 

By  violation  of  Bank  Act 136 

Closed  bank,  when  discharged  fi:om 122 

Comptroller  to  decide  as  to  suit 58 

Converted  State  bank  for  old  notes 144 

Creditor's  bill  against  shareholders 173 

Enforcing  by  Receiver 130 

Estates  owning  stock  subject  to 60 

False  certification  of  checks loi 

False  entries 14° 

Individual,  of  Directors .,•  •    ,„2 

Individual,  of  Shareholders 47-o0,  126 

Limited  to  amount  of  capital,  except 97 

Preference  to  creditors 56 

Share  of  stock,  claim  of  fraudulent  holding 49 

"  "     owned  of  other  association 57 

"  "     pledgee  of 53 

"  "     registered 50,  53,  55 

"  "     transferred 50 

Shareholders'  agent Jn^tn 

"  assigning  for  creditors '*^'  „ 

"  debars  from  voting 37 

"  exempt  from,  when 48 

"  of  bank  In  liquidation 173 

Trustees  exempt  ft-om,  when 60 


334 

PAGB 

Liabilities— Associations  organized  under  Act  of  February  25, 1863     65 

Comptroller's  report  to  contain  statement  of  National  banks 3 

Converted  State  banks 63,  144 

Deticiency  in  reserve,  then  not  increase 80 

Deposit  of  lawful  money  relieves  from,  on  circulation 122 

Duties  of  Receiver 126 

Extended  associations 178 

Liquidating  associations,  on  consolidation 121 

Loans,  actual  borrower  alone  chargeable 94 

Loans,  restrictions  on 93 

Reports  of  condition  to  show 102,  246 

Restriction  on 97 

LiBN— Illegal  preference  of  creditors 138 

Interest  on  bonds 103,  104 

United  States,  on  assets  for  circulating  notes 126,  134 

Limitations— Aggregate  of  circulation 171,  181 

Associations,  corporate  existence 6 

Bonds  to  be  kept  on  deposit 67,  180 

'  Bonds,  withdrawal  of 167 

Capital,  converted  State  banks 62,  63 

Capital  stock,  increase  of 31 

"  impairment  of 28,  99,  100,  175 

"  reduction  of 34 

"  payment  of 27 

"  requirements 23 

Circulation,  denomination 71 

"  deposit  of  lawful  money  on  withdrawing 181 

"  increase  of,  restricted 181 

"  exempt  from  tax 143 

"  obtainable 70,  71 

"  of  all  associations  to  be  taken  at  par 83 

"  tax  on 103,  145 

"  unauthorized 76 

"  of  State  banks,  tax  on   ...  172 

Comptroller  or  Receiver  may  be  enjoined,  when 135 

Creditors  of  insolvent  banks,  notice  to 133 

Creditors  of  insolvent  bank,  Ulegal  preference 138 

Directors,  number  of 39 

Dividends 92,  98,  99,  253 

Expiration  of  corporate  existence 182 

Extended  association,  deposit  of  lawful  money  by 178 

Extension  of  corporate  existence 177 

Inspection  of  list  of  shareholders 102 

Interest  rate 83,  84 

Jurisdiction  of  courts 159,  187 

Lawful  money  deposited  to  retire  circulation 181,  179 

Liability  of  National  banks 97 

Location  of  associations,  change  of •  •  • 185 

Loans 93,  94 

"  National "  in  title  of  bank 116 

Place  of  business       79 

Public  depositaries 61 

Real  Estate  holdings 19 

Receiver,  appointment  of 28,58,80,100  101,126,  173 

Receiver,  purchase  of  proi>erty  to  protect  trust 183 

Re-issue  of  retired  circulation  on  lawful  money  deposit 181 

Report  of  condition,  trausmission 102 

Reports  of  earnings  and  dividends,  transmission 103 

Reserve  requirements 80 

Reserve  with  central  reserve  agents 81,  82,  187 

Reserve  with  reserve  agents 81,  186 

Savings  banks  in  District  of  Columbia,  capital  of 173 

Shareholders'  agent,  duties  of 192 

Shareholders'  personal  liability 47,  62 

Shares  of  stock,  par  value 24 

Shares  of  stock,  directors  to  own 39 

State  taxation  of  money 145 

State  taxation  of  National  banks 105 

Stock,  purchased  or  acquired 96 

Suits,  conduct  of 57,  132,  163 

United  States  bonds  deposited 66 

United  States  note  certiflcates,  denominations  of 81 

United  States  gold  certificates,  issue  of 81 

United  States  Treasurer  to  redeem  circulation  presented 166 

Usury,  right  of  action  for 86-89 

Vlsltorial  jx)wers 116 

Voluntary  liquidation,  vote .- 118 

Voluntary  li(juidation,  deposit  of  lawful  money I2t 

Voters  at  elections 37 


335 

PAGS 

Liquidation,  Voluntaby— Bonds  withdrawn 122 

Consolidation 121,  122 

Contracts  not  malie 118 

Creditors'  bill  against  stockholders 173 

Expiring  associations  to  comply  with  provisions  for 180 

Forms,  resolutions  and  notices     ....  228 

If  insolvent  not  valid,  but  must  be  shown 119 

Jurisdiction  of  Conns 159,  187 

Lawful  money  to  be  deposited  . 121 

limitation  of  charter 180 

Notice  of  to  bo  published 120 

Penalty  for  issuing  circulation  of  associations  in 157 

ITocedure 118-121,  226 

Provisions  for,  in  charter 6 

Redemption  of  circulation  of  associations  in 123,  174 

Sale  of  bonds,  when 122,  124 

Vote  required 118 

When  date  from 120 

LiguiDATioN  AND  Rbceivkrship— (Scc  also  Insolvency  ;  Receiver). 

Funds,  forfeiture  or 124 

Bonds,  at  auction  or  private  sale 125 

Charter,  forfeiture  of,  and  Directors'  liability 136 

Circulation,  jirotest  of 123 

Distribution  of  assets  of  insolvent  associations 133 

Enjoining  proceedings,  and  where 135,  163 

Illegal  preference  of  creditors 138 

Jurisdiction,  general,  of  National  bank  cases 187 

Jurisdiction  of  Circuit  Courts 159 

Lien  of  U.  S.  on  assets,  for  what 125 

Notice  to  creditors  of  insolvent  associations 133 

Notice  to  present  (irculation  for  redemption 124 

Penalty  for  issuing  circulation  of  expired  associations  .   .  157 
Receiver,  appointment  of .  .   .        28,58,80.100,101,126,173 

Receiver,  purchase  of  property  to  protect  trust 183 

Receivership,  expenses  of 136 

Shareholder's  agent,  appointment  and  duties 192 

Suits,  conduct  of 57, 132,  163 

Suspension  of  business  for  non-payment  of  circulation  .  .  124 

Taxes  on  insolvent  associations  remitted 176 

Loans— Borrower  liable,  though  loan  illegal 22 

By  what  liabilities,  not  limited 97 

Circulation  as  collateral  for  prohibited 98 

Entry  in  report 151,  244 

Forbidden  when  reserve  short 80 

Illegal  Interest 86 

In  excess  when  collateral  is  given 95 

Limit  of  indebtedness 97 

Penalty  for,  in  excess 95 

Policy  in  making 223 

Prohibited  on  security  on  own  stock 96 

Rate  of  interest 83,  84 

Real  Estate  prohibited 19 

Restrictions  on 93 

Usurious  to  Directors 92 

When  restriction  applicable 94 

Location— Change  of 185 

Organization  certificate  to  state 6 

Lost  or  Destroyed  Notes— How  replaced  76 

Profit  on,  to  inure  to  the  Government 179 

Lost,  Defaced  or  Destroyed  Bonds— Proceedings  in  regard  to 293 

Losses— With  bad  debts— when  exceeding  profits 98 

M 

Maceration- Destruction  ofnotes,  by 76,170 

Management  of  Associations — Suggestions  as  to 221 

Married  Women— As  shareholders  or  directors 40,49 

Indorsement,  special 9 

May  be  corporators 198 

Purchase  of  stock  by 49 

Mbbtings— Annual 37,  45 

Elect  agent  of  failed  bank 192 

Increase  of  capital 31 

Reduction  of  capital 34 

Minors — Bonds  Standing  in  name,  interest  how  paid 293 

MisDBMBANOR—(See  Crimes ;  Penalty;  Official  Jfal  feasance). 
MoNBys—(See  Lawful  Money ;  Legal  Tender;  Circulation:  Public  Moneys). 


33^ 

PAGB 

Mortgages — Assignment  of  failed  bank,  by  preference  void 138 

Foreclosure  by  association ,'..'!!!     20 

Limitation  to  holding .'  !   !   !  19  23 

Mortgagee  liable  on  illegal  loans !  !  !  .  '  18 

Official  malfeasance '  .  146  147 

Purchase  of,  by  receiver,  when '.'.'..  183*  184 

Real  estate,  possession,  etc ,  of,  by  association '         2<J  21 

Selling ;  !  .  '  17 

Municipal— Deposits,  associations  may  receive 7 

Notes,  tax  on !'.!!!    144 

Mutilated  or  Worn  Circulation— Redemption,  destruction  and  re-issue    ....    76,  isi,  275 

Redemption  of  fragments 277*  283 

N 

Name  op  Association — (See  Title). 

National— Restriction  on  use  of  word Hg 

National  Bank  Act — Providing  for  a  National  Currency 2 

Status  of  associations  organized  under  Act  of  February  25, 1863   ."  .     65 
Index  to  sections  and  amendments 331 

National  Banking  Associations— Articles  of  Association .5^  198 

Body  corporate,  when  become 6,  29^  206 

Bonds  U.  S.,  deposit  requirement,  etc.      (See  Bonds' 
U.  S.) 

Branch  banks 65,  79,  80 

Branch  banks  of  converted  State  banks 65 

Broker,  cannot  act  as 17 

Business,  begin,  when  ...      30 

Business  '•egulation  of  (See  Regulation  of  Association. ) 

By-laws,  form  of 216 

Capital  stock,    payments,    increase,    reduction,    etc. 

(See  Capital  Stock.) 
Certificates  required  to  Comptroller.  (See  Certificates.) 
Charter,  limit  of,  forfeiture,  etc.    (See  Corporate  Ex- 
istence.) 
CirculatioUj  issue,  redemption,  retiring,  etc.     (See 
Circulation.) 

Clearing-house  membership 9 

Closing  on  expiration  of  charter 180,  234,  236 

Conversion  of  State  banks  into 62,  211 

*  Consolidating  of  associations,  mode  of,  etc.    (See  Con- 

solidation.) 
Crimes,  jurisdiction,  etc.    (See  Crimes,  etc.) 

Defined 66 

Deposits  allowed,  liability,  etc.    (See  Deposits.) 
Directors,  election,  liability,  etc.    (See  Directors.) 

Dividends 92 

Extending  charter,  procedure,  forms,  etc.    (See  Ex- 
tension of  Corporate  Existence.) 
Evidence  to  court,  certified  impers.    (See  Evidence.) 
Examinations  required,  etc.    (See  Examinations.) 
Failed.    (See  Insolvency.) 

Government  depositaries  may  be 61,  62,  236-243 

Indian  Territory,  provisions  for.    (See  Indian  Terri- 
tory.) 
Iryunction  of  bank.  Comptroller,  Receiver-    (See  In- 
junction.) 
Insolvency,  proceedings  in.    (See  Insolvency.) 

Interest,  forfeiture,  etc 87,  88 

Leases  only  valid  after  chartered 20 

Liability.    (See  Liability.) 

Liquidation,  procedure,  etc.    (See  Liquidation.) 

Loans,  restrictions,  etc.    (See  Loans.) 

Location  and  name 5, 185,  197 

Management,  suggestions 221 

Oflicers,  duties,  liability,  etc.    (See  Officers.) 

Oklahoma,  provisions  for 190 

Organization  of 5,  66,  79, 195,  211 

Organization  with  $50,000  capital 23,  24 

Past  notes  prohitnled,  as  circulation 76 

Powers  of    (See  Banking  Powers.) 
Real  estate,  holding,  forclosure,  etc.  (See "Real  Estate.) 
Receiver,  appointment,  duties,  rights,  etc.    (See  Re- 
ceiver.) 

Reorganization,  in  lieu  of  extending 233 

Reports  required.    (See  Reports.) 

ReBerveof  lawful  money.  (See  Lawful  Money  Reserve.) 

Shareholders.    (See  Shareholders.) 


337 

PACK 

National  Banking  Associations— Shares,  issue,  rights  of,  transfer,  seizure,  etc.    (See 

Shares.) 
State  Couri.i,  relation  to.    (See  State  Courts.) 
Status  of.  organized  under  Act  of  February  25, 1863  .    .     65 

Stock  held  of  other  associations 57 

Subscriptions  to  stock,  liability,  etc.    (See  Subfcrli*- 

tions.) 
Suits,  action  in,  otc.    (See  Suits.) 
Taxation,  shares,  etc.     (See  Tax.) 

Title  of 5, 185,  197 

Usury.    (See  Usury.) 

Voluntary  liquidation,  procedure,  etc.    (See  Liquida- 
tion Voluntary.) 

War  revenue  requirements 300,  302 

National  Bank  Notes— (See  Circulation). 

National  Bank  Resekvb— (See  Lawful  Money  Reserve). 

National  Bank  Stock— (See  Shares). 

Net  Earnings— (See  Profits). 

New  York  City— Associations  in,  reserve  agents 80,  81 

Bonds,  forfeited,  sale  of,  in 125 

Notice  of  expiration  of  corporate  existence  published  in 180 

Notice  of  voluntary  liquidation  published  in 120 

Non-Rbsidbnts— Directors 39 

State,  etc.,  taxation  of  stock  of 105 

Notary  Public— Director's  acluiowledgment 

Organization  certificates,  acknowledgment  of 8 

Protest  of  circulating  notes  by 123 

Reports,  acknowledgment  of 102, 178 

Shareholders' list,  acknowledgment  of ■ 102 

Notice— (See  also  Publication ;  Printing  ;  Advertisement). 

Appointment  of  special  examiner  bv  Comptroller 124 

Bonds,  U.  S.,  transfer  of 67,  68 

Capital,  payment  of  increase       81 

"        payment  of  installments 28 

to  make  good 28, 100,  175 

"        reduction  of 34 

Circulating  notes,  protest  of 124 

Election  of  directors,  deferred 45 

Extension  of  corporate  existence 177,229 

Liquidation 118,  120 

Organization,  to  Comptroller 196, 197 

Reserve  to  make  good 80 

Stock  appraised  in  extension 179 

Shareholders'  meeting 37,  45 

NuMBBR— Charter,  to  be  pi\ntea  on  notes 168 

o 

Oath— Certificate  of  officers  and  directors 27,  80 

Directors 39,  40 

Examiners  may  take  statements  under 115 

Execution  of  organization  certiflcate 6,  62 

Official,  by  Comptroller 2 

Official,  by  Deputy  Comptroller 2 

Payment  "of  installments 27 

Reports  of  condition,  etc.    .   .   .  ^ 102,  103,  176 

Semi-annual  return  of  circulation 104,  144 

Shareholders,  list  of 102 

Obliqations  op  the  United  States— (See  also  Bonds,  U.  S.). 

Defined 166 

Exempt  from  State  tax      145 

Penalty  for  dealing  in  counterfeit 157 

Penalty  for  illegal  possession  or  use  of  material  for  .   l.S5 

Penalty  for  passing  counterfeit 156 

Penalty  for  pledging 146 

Penaltv  for  taking  or  having  impressions  of  tools, 

etc.". 157 

OmcBKS  OP  Association— (See  also  President ;  Cashier). 

Action  of  executive  not  ground  for  receiver 136, 137 

Appointment  and  bonds     222 

Bonds  a-ssigned  bv  cashier  or  other 67 

Certificate  of  directors  and 30 

Certificate  of  payment  of  increase  of  stock 31 

Certification  of  payment  of  stock  by  president  or  ca-shier  ...     27 

Circulation  iiroperly  signed,  issuable 75 

Circulation  returns  for  assessment  by  president  or  cashier 
attest 104, 144 


338 


PAGB 

Ofpicbrs  of  Association— Directors  disqualified    to  examine  association  in  which  in- 
terested as 116 

Election  or  appointment  of,  by  directors 6 

Examination  of,  under  oath 116 

Forfeiture  of  charter 136 

Forged  signatures  of,  to  circulation  not  to  invalidate 191 

Fraudulent  notes  to  be  stamped  by 175 

Liable,  on  failure  to  record  transfer  of  stock 50 

Management  of  bank 221 

Oath,  administration  of,  to  reports 176 

Penalty  for  false  certification  of  checks 101, 182 

"         improper  countersigning  circulation 146 

"         issuing  circulation  of  expired  associations  ....    157 

"         official  malfeasance      146 

"  pledging,  etc.,  circulation 146,  147 

'•         unauthorized  receipt  of  public  money 158 

Preference  of  creditors 138 

President  of  board  directors 46 

President  or  cashier,  certification  of  extension 177,  230 

"  "         certification  of  expiration  of  charter  .  180,  235 

'•  "  certification  of  liquidation 120 

"  "         waiving  notice  of  protest 123 

President  or  vice-president  and  cashier  to  sign  circulation  .  .     71 

Proxy,  not  to  act  as 38 

Receiver,  appointment  of,  for  violation  of  Bank  Act  .  .  28,  fi7,  58, 

100,  101,  126,  173 

Redemption  of  unsigned  circulation 191 

Reports  of  condition,  president  or  cashier  verify 102 

Reports  of  earnings  and  dividends,  president  or  cashier  attest .    103 

Shareholders'  list,  president  or  cashier  verify 102 

Tenure  of  office 16 

When  action  against,  under  State  laws 151-153 

Official  Bonds— (See  Bonds,  Official). 

Officers,  United  States — Deposit  and  withdrawal  of  public  money 286 

Fraudulent  notes  to  be  stamped  by 176 

Penalty  for  unlawful  signing  or  delivering  circulation   ....    146 

Penalty  for  unauthorized  deposit  of  public  money 238 

Officbs,  Vaults,  ETC.— Assignment  of,  to  the  Comptroller  by  the  Secretary 3 

Oklahoma— Qualification  of  directors  of  association  in 190 

Organization  AND  Powers  OF  National  Banks — Articles  of  association 5,195,211 

Amendment  of  articles  of  association    .     24 
Branches  of  converted  State  banks  .   .   .     66 
Capital  stock,  payment,  increase,  reduc- 
tion, etc.    (See  Capital  Stock.) 
Certificate  of  authority  to  begin  business     30 
Certificate  of  officers  and  directors  .  .  29,  30 

Chauge  in  title  and  location 185 

Conversion  of  State  banks 62,  211 

Corporate  powers 6 

Deposit  of  bonds 66 

Directors,  election,  qualification,  duties, 

etc.    (See  Directors). 
Examination  preliminary  to  beginning 

business 29 

Execution  of  organization  certificate  .  .       6 
Extension  of  corporate  existence  ....    177 

Failure  to  hold  election 45 

Gold  banks,  organization  of 77 

Incidental  powers 6,  7 

Liquidation 118 

Location 5 

Organization  certificate 6 

President,  election  and  qualification  .   .     46 
Publication    of  certificate  of  authority 

to  begin  business 31 

Shareholders,  rights,  duties  and  Uabili- 

ties,  etc.    (See  Shareholders;. 
Shares  of  stock.    ( See  Shares). 
State  banks  converting  to  National  banks, 

(See  State  Banks). 
Status  of  associations   organized  under 

act  of  Feb.  26,  IHtii 66 

Title 6 

Oroanization  Cbrtificatb— Certified  copy  of,  evidence  of  banks  existence  in  suits  ...   163 

Qomptroller  to  grant  or  withhold 80 

Conversion  of  State  banks ....     62 

Description  of 6 

Execution  of 6,  208 

Form  of 202 


339 

rAas 

Organization  Certificate— Proceedings  in  reference  to ft,  201-208 

Healed  ceniflcate  of  Comptroller,  evidence 168 

Specifications  in b,  2f)l 

Overdraft— False  entry  In  report 148,  149,  151 

Interest  on 86 

Wlien  embezzlement 149 

When  allowed,  make  bills  receivable 244 

P 

Paying  Teller— Position  of 224 

Payment  OP  Capital  Stock— Pro  visions  relative  to 27,208 

PENALTv—Appointment  of  receiver  for  violation  of  act 12« 

Bond  of  Comptroller 2 

Bond  of  Deputy  Comptroller 2 

Counterfeitnig  circulation 156 

Dealing  in  counterfeit  circulation 157 

Directors,  violation  of  law 136 

Embezzlement 146,  147 

False  certification  of  checks 101,182 

Failure  to  pay  assessment  on  stock 175 

Failure  to  pay  installment  on  stock 28 

Failure  to  redeem  circulation 123,  124 

Forfeiture  of  charter 136 

Illegal  possession  or  use  of  material  for  circulation 155 

Imitating  bank  circulation  for  advertising  purposes 78 

Improper  countersigning  or  delivering  circulation 146 

Insolvent  bank 173 

Interest,  unlawful 86-88 

Issuing  circulation  of  expired  associations 157 

Jurisdiction  of  United  States  courts 160 

Loans  In  excess  of  limit 95 

Loans  on  shares  of  association 96 

Misapplication  of  money-order  funds 838 

Mutilating  circulation 78 

"National,"  unlawful  use  of  the  word 116 

Official  malfeasance 146 

Passing  counterfeit  circulation 156 

Pledging  United  States  notes  or  bank  circulation 146 

Keports  to  Comptroller,  failure  to  make 103 

Reserve,  maintenance  of 80 

Semi-annual  return  of  circulation 104, 144 

Taklngor  having  unauthorized  Impressions  of  tools,  etc 167 

Unauthorized  deposit  of  public  money 238,239 

Unauthorized  receipt  or  use  of  public  money 158 

Personal  Liability.— (See  Shareholders,  Trustee,  Liability). 

Personal  Security — Defined 8,  9 

Married  women,  indorsement  of  mortgage  note 9 

Place  of  Business — Defined 79 

Circulating  notes  payable  on  demand  at 72, 166 

To  appear  In  organization  certificate 6,  202 

Pleading — In  suit  for  illegal  tax 114 

Pledge— Of  bond,  etc. ,  as  security 9 

Pledgee- Liability  on  stock 63 

Plates  and  Dies— Control  and  custody  of 8,  72 

Engraving  of 71 

Examination  annually 79 

Expense  of 166, 167,  211 

Expense  of  examination  and  destruction  of 72 

Extended  banks 177 

Of  liquidating  bank  to  be  destroyed 72 

Penalty  for  counterfeiting  or  possessing  counterfeits 165-157 

Penalty  for  having  false  impressions  of  tools 157 

Penalty  for  taking  unauthorized  impressions  of  tools,  etc 157 

Pledging  or  Hypothecating  Circulation— Prohibited 98 

Population  —Relation  of  capital  stock  to 23 

Postmasters- Deposit  of  public  funds  by 238 

Post-notes— Associations  prohibited  from  issuing 76 

Powers— (See  Banking  Powers). 

Power  of  Attorney— Agent,  to  witness  destruction  of  mutilated  notes 76 

Agent,  signing  for  corporators 204 

Amend  articles  to  extend  charter        177 

Appointment  of  agent  to  examine  bonds 69 

For  assignment  of  bonds 289 

In  foreign  language  must  be  translated 29c 

Substitution 290 

To  collect  Interest  on  U.  S.  bonds 292 

To  withdraw  bonds 274 


340 

PAOB 

Preferred  Creditors— Holders  of  circulation  notes  only 126,  134 

Unlawful  to  make ^e 

Preparation  of  Circulation— Provisions  for '1 

President— (See  also  Officers). 

Acting  as  cashier *> 

Board  may  remove *6 

Capital  stock,  payment  of 27 

Certificate  of  officers  and  directors 29 

Circulating  notes  protested 123 

Director  to  be 46 

Election  or  appointment  of,  by  directors 6 

Ex  officio  and  vested  powers ;,;  «*^ 

Extension  of  charter *■"•  »32 

False  certification  of  checks  and  penalty  for 101, 182 

Liable  for  statement  of  banks'  condition 57 

List  of  shareholders  to  keep 101 

Liquidation 120 

Loans  to  minors :  :  ■  ^  \.-      ;r  ■  ,■      ■  ■ *l 

Maybeexaminedunder  oath  by  National  bank  examiner 115 

Not  liable  on  leave  of  absence 42 

Position  of ■   ■ *22 

Official  malfeasance,  penalty  for 147 

Proxy,  not  to  act  as.   . 37 

Public  money,  unauthorized  receipt  oi,  by io» 

Report  of  condition  to  Comptroller     103 

Report  on  circulation  to  Comptroller 104 

Signature  of,  forged,  not  to  invalidate  circulation 191 

Signature  of,  on  circulation '^',15 

Violation  of  bank  act,  penalty  for 136 

WTien  shareholders  delinquent 28 

President  OF  THE  United  States— Appointment  of  Comptroller  by 1 

Printing— Charter  numbers  on  circulation  ....       in  ti 

Circulation  of  associations 'lii 

Circulation  of  extended  banks •  * 179 

Comptroller's  annual  report 4 

Profits,  Net— Disposition  of  in  dividends  and  surplus 92 

Losses  deducted  before  declaring  dividends 98 

Other  than  legal  surplus 99 

Report  of,  to  Comptroller 103 

Undivided,  deflned 99 

Projiissory  Notes— Attorney  fee  clause °l 

Set  off  for  indorser i*i 

With  mortgage  clause 22 

Protest  of  CiRCULATioN—Bonds  forfeited,  when 124 

Bonds,  sale  of,  when i;^2 

Failure  to  redeem 1*3 

Proxy— Clerks,  cannot  act  as 38 

Not  bind  principle,  in  illegal  meeting ^» 

Officers  cannot  vote  as 0700 

Shareholders 3(,  ao 

Publication— (See  also  Notice).  _ 

Annual  election,  notice  of  holding  special .,  J,?, 

Certificateof  authority  to  begin  business '^li 

Change  of  title  or  location,  notice  of l°5 

Comptroller's  certificate  of  extension  of  charter 178 

Creditors  of  insolvent  associations,  notice  to i^i  i-o 

Expiring  associations,  notice 176,  1^9 

Non-payment  of  circulation,  notice  to  present '1^ 

Reports  of  condition  of  banks  In  District  of  Columbia inA  oio 

Reportsof  condition  of  National  banks '  i or 

Sale  of  bonds,  notice  of oq  17? 

Sale  of  delinquent  stock,  notice  of '  iqo 

Shareholders*  agent,  notice  of  election  of i»;^ 

Voluntary  liquidation,  notice  of 1*" 

Public  DBBT—(SeealsoImportsandIntereston  Public  Debt).       ,  ^    ,  ,„ 

Amount  of  U.  S.  notes  outstanding  to  appear  m  statement  of •  •   J^s 

Public  Moneys— Regulations  in  regard  to o''  *^^^^ 

PuRCHASB—Billsofexchange,  when  not  usurious i^'ial 

Of  property,  real  or  personal,  by  receiver i**^' i^J 

Shares  of  own  stock  of  association "^ 

Q 

Qualification— (See  also  Directors  and  Officers). 

Comptroller  of  the  Currency ? 

Deputy  Comptroller oa  •oi 

Directors  and  officers '  ?Si 

Directors  of  National  banks  in  Oklahoma iw 

Examiners  of  associations n* 


34i 

PAOB 

Qualification— Receivers  of  aasociationa 129 

Shareholders'  ageut IM 

B 

Rate— (See  Interest,  Taxation). 

Rbal  Estate— Assigumeut 18 

Banking  house,  what  may  cover 20 

Conveyance  not  void,  though  bank  exceed  rights 2i 

Discounting  paper  having  real  estate  security i:0 

Illegal  borrowing  on,  not  defense  against  bank 22 

Investments  and  hokiiugs  restricted 19,  2<»,  23 

May  purchase  more,  than  debt  to  cover 21 

Mortgage  to  indorser  inuring  to  bank 22 

Purchase  or  convey,  how 20 

Purchase  of  certificate,  of  aasignment  of 18 

Purchase  to  save  equity 18S,  184 

Subject  to  State,  etc.,  taxation 105 

Violation  of  law,  not  hinder  foreclosure 2'i,  21 

Wisdom  of  restrictions  on  real  estate  dealings  of  National  banks 22,  23 

Rbal  Estate  Company's  Stock — As  collateral 21 

RK-.\ssiGNMBNT-Of  bonds 07,68,70,167 

Rbcbivbr— Appointment  and  duties  of .126 

"  o^  for  failure  to  dispose  of  stock 96 

"  of;  for  failure  to  restore  diminished  capital 28 

"  of,  for  false  certification  of  checks 101 

"  of,  for  non-payment  of  circulation •  •    128 

*'  of,  for  impairment  of  capital 100 

"  or  for  violation  of  law,  etc., 57,68,173 

"  of,  for  non-maintenance  of  reserve 80 

Attorney  for 132 

Bank  office,  may  move 128 

Compounding  debts 129 

Corporate  existence  not  terminated  by  appointment  of 128 

Courts  may  appoint 127 

Courts  may  enjoin 135,  163 

Directors,  suit  against 132 

Enforcing  individual  liability 130,  131 

Expenses  of,  how  paid 136 

General  jurisdiction  of  National  bank  cases 187 

Jurisdiction  of  courts 129,  159 

Limitation  of,  power  of 128,  129 

May  hold  shareholders  for  illegal  dividend 93 

Maybe  removed  by  Comptroller  of  Currency 127 

Purchase  of  property  by,  to  protect  trust 18:!,  184 

Replevin 140 

Responsibility  in  action 131 

Sale,  order  of  court  necessary 129 

Suits  by  and  against 130,  189 

Suit,  illegal  transfer  of  stock 66 

Transfer  suit 142,  188 

When  recover  for  stock  sold  bank 97 

RBCBivERSHip~(See  also  Receiver). 

Action  of  executive  officers,  not  ground  for 137 

Comptroller's  decision  of  insolvency  final 126,  127 

Expenses  of,  ^rst  lien  on  assets 136 

Fees 136 

Receiving  Teller— Position  of 224 

Records  of  Association— How  kept 221 

Shareholders  access  to 24 

Record— Transfer  rights 26 

Redemption- At  own  counter 72,  166 

Cancellation  of  redeemed  notes 126 

Deposit  of  lawful  money,  associations  in  liquidation 121 

Disposition  of,  account 190 

Enjoining  Comptroller  as  to 135 

Extended  bank  circulation 179 

First  lien  on  assets 125 

Five  per  cent,  fund  fof,  to  be  maintained IGj,  106,275 

Forfeiture  of  bonds •  ■ 1"^4 

Forged  signatures  not  to  prevent 191 

Fragments 277,  283 

General  provisions  respecting 82, 83, 165, 167,  275, 281 

Liquidating  bank  circulation 123 

Notes  of  bank  failing  to  pay 125 

Notes  of  closed  bank 125 

Notice  of  present  circulation  for 124 

Of  notes  generally  by  Treasurer 165,169 


34« 

PAOB 

Rbdemption— Proceeds  ftom  sale  of  bonds  for  circulation m 

Profit  on  circulation  not  presented  for 179 

Protest  of  circulation,  for  failure  to  redeem 13* 

Provisions  for,  of  circulation 76,  166,  278 

Provisions  for,  of  United  States  note  certificates 81 

Records  of 126 

Sale  of  bonds 12i 

State  bank  circulation,  converted,  provisions  for 144 

United  States  notes,  of  circulation  in 166 

Unsigned  circulation  to  be  redeemed 191 

Withdrawn  circulation 121 

Worn  or  mutilated  circulation 76,  181,  277, 283 

Rediscount— Authority  to  malie 13 

Illegal  interest,  right  of  action 87 

Not  borrowing  money U 

Refunding— Excessive  tax  paid  on  circulation 104,  105 

Rbgister  of  the  Treasury— Signattire  on  circulation 71 

Registered  Bonds— (See  also  Bonds,  United  States). 

Assignment  of 287,  290 

Closing  of  transfer,  book  of 298 

Collection  of  interest  on 291,292 

Coupon  exchanged  for 67 

Form  of  affidavit  for  lost 294 

Information  about 287 

Transmission  of,  to  Treasury 290 

Regulation  of  Associations— Organization,  de  novo 5.  195 

Organization,  conversion  of  State  banks 62,  211 

Management  of    .  .   .  221 

Shareholders'  meetings,  liability,  etc 37,  39,  45,  47 

Board  of  Directors 39 

Capital,  payment  of 27,  208 

Capital,  increase  of 31 

Capital,  reduction  of 34 

Circulation,  issue,  bond  requirement,  etc 6,  66,  209 

Circulation,  redemption  of 76,  165 

Circulation,  retiring 167 

Deposits 7 

Loans 6,  19,  93,  223 

Interest 83 

Taxes 103,  300 

Surplus 92 

Dividends 92 

Reports  to  Comptroller  .  .      102,  244 

Reserve  requirements 80,  146,  267 

Real  Estate,  restrictions 19,  23 

Examiner    ...         115 

Extension  of  corporate  existence 177,  229 

Voluntary  liquidation 118,  226 

Violations  of  law 28,  67,  86,  100, 101, 122, 146,  173 

Receiver 126 

Reimbursement— (See  Circtxlation;  Bixpenses;  Plates  and  Dies.) 

Released  Capital  Stock— Disposition  of 36 

Repeal— Redemption  agents 166 

Requirements  as  to  agg^regate  circulation 167,  171 

Requirement  Act  of  Congress  to  Increase  capital 184 

Reserve  on  circulation  .  165 

Tax  on  capital  and  deposits 183 

Replevin— Right  of  action 140 

Reports— Annual,  to  be  made  to  Congress ,;    ,  5 

Bank  Examiner 115,  116 

Circulation,  semi-annual  returns 104 

Condition  of  association 102,  225,  244 

Dividends  and  earnings 103,  253 

Explanation  of  items  in  reports  to  Comptroller 244,  253 

Forms  of,  to  Comptroller 249,  256 

List  of  shareholders 102 

Payment  of  capital  stock 27 

Receiver *26 

Rbsbrvb— (See  also  Lawful  Money  Reserve). 

Clearing-house  certificates,  to  count  as 81 

Five  per  cent,  fund,  to  count  as 165 

Gold  certificates,  to  count  as 182 

Penalty  for  failure  to  maintain 80 

Proportion  of,  with  agents 81 

Requirements 80 

Silver  certificates  to  count  as 182 

U.  S.  note  certificates  to  count  as 81 

U.  a  notes  not  to  be  used  as,  by  Secrctarj'  of  Treasury 81,  168 


343 

Reserve  Agents— (See  also  Agents). 

Balance  with 81 

Central 81,  82,  187 

Cities  ill  which  may  be  located 81,  82,  186 

Reserve  Cities— Application  to  beccjiue,  form 273 

Central 81,  187 

Other  tliaii  central 81,  82,  186 

Requirements  of  assuciatiou  in 80 

Resolution  of  Board,  form      27ll 

Reserve  op  Lawful  Money— (See  Lawful  Money  Re.serve). 

Residence— List  of  shareholders  reported  uuuually 102 

List  of  shareholders  in  organization  certificate 6 

National  banks 79 

Qualification  of  Directors  of  association 80 

Resignation— Directors 24 

Returns— (See  Circulation  ;  Reports  ;  Taxation). 

Revised  Statutes,  United  States- Index  of  Sections  of  Bank  Act  and  additional  Acts  .   .    331 

s 

Bale- Appraised  stock  of  extended  association 179 

As-^ets  of  insolvent  associations,  by  Receiver 126 

Assets  of  insolvent  associations  by  shareholders' agent 193 

Bonds  for  failure  to  redeem  circulation     122,1*24,  125 

Of  stock  binding  without  registra'ion 50 

Stock  for  delinquent  payment  of  instalment 28 

Stock  on  impairment  of  capital 175 

Stock  taken  for  debt 96 

San  Francisco— Redemption  of  United  States  notes  at 187 

Savings  Banks— Limit  of  capital  of  existing,  in  the  District  of  Columbia 175 

Reports  of,  provided  for  in  annual  report 3 

Trust  Companies  and,  in  the  District  of  Columbia 175 

Schedules— In  reports  to  Comptroller 251,  262 

Seal— Certified  copy  of  organization  certificate  under,  evidence 163 

Certificates  under,  competent  evidence 163 

Devised  by  the  Comptroller,  and  approved  by  Secretary 8 

Evidence  of  Comptroller  filed  with  Secretary  of  State 3 

Of  association 6 

Secretary  of  State— Description,  impression,  etc.,  of  seal  of  Comptroller,  filed  with  ...  3 

Secretary  OF  Treasury— Appointment  of  Comptroller  on  recommendation  of 1 

Appointment  and  classification  of  clerks  by 2 

Appi  )intment  of  Deputy  Comptroller  by              2 

Assignment  of  rooms,  etc..  for  the  Comptroller  by 3 

Certificates,  issue  of  for  II.  S.  notes 81 

Certifying  destruction  of,  worn  or  mutilated,  by 76 

Charter  number  on  notes,  printing,  regulations  by     168 

Circulation,  printing,  regulations  by ,.  71 

Currency,  expansion  or  contraction,  by  certificates,  prohibited  .  81 

Designates  National  banks  as  U.  S.  Depositaries 61 

Dutiesof  Comptroller,  under  general  direction  of 1 

Examiner,  approval  of  appointment 115,  124 

Exchange  of  bonds,  by 67,  69,  70 

Issue  coin  for  fractional  currency 170 

Organization  with  capital  less  than  $100,000  to  be  approved  by  .  23 

Plates  and  dies,  examination  of,  by 72 

Receiving  deposit  of  U.  8.  notes 81 

Receiver,  appointment  of,  for  reserve  deficit,  concurrence  in  .   .  80 

Receiver,  to  approve  certain  action  of 183,  184 

Reserve  cities,  designation  of,  to  be  approved  by 187 

Seal  of  olScc  of  Comptroller,  to  be  approved  by 3 

Sbcuhitibs  of  United  States — (See  also  Bonds). 

Defined 165 

Security  for  Circulation— (See  Bonds,  V.  S.). 

Security  for  Loans — Personal 6,  8 

Shares  of  own  bank  not  to  be  taken 96 

Should  be  readily  convertible 23 

Stock  of  Real  Estate  Companies,  Cdllateral 21 

Set  Off— Against  insolvent  bank 141,  142 

Illegal  interest,  not 86 

Shareholders' 68 

Shareholders'  Agent — ApjKjintinont  and  dutle:^,  for  insolvent  bank 192 

Shares -Appraisal  of  stock  for  holders  not  extending 179 

Association  liable,  on  offlcors'  .statement  of  value 67 

Association  not  to  own  or  hold  its  own,  except 96 

Certificates,  care  of     224 

Consent  of  owners  of  two-thirds,  necessary  to  extension 177 

Converted  State  hank,  par  value 62 

Delinquent,  forfeiture  and  sale 28,  17& 


344 

PAoa 

Sharbs— Directors',  minimum  holding Z9 

Disposition  of,  taken  for  debt 98 

Execution  under  Slate  laws 24 

Fifty  per  cent,  of  aggregate  value,  paid  to  begin  business 27 

Fractional  parts  may  be  issued 35 

Holding  of,  in  other  banks 67,  62 

Instalments,  payment  and  certification  of '27 

Liable,  when 50-57 

Lien  on  association,  cannot  acquire 95 

List  of  owners  kept,  and  copy  sent  Comptroller .'  '    102 

Loan  on  security  ol,  prohibited !  ."  !  !     96 

Negotiability  depends  on  United  States  law,  not  State ,  .  .  .  .    119 

Oath  of  Directors  relative  to [  [  '     39 

Owners  of  two-thirds,  may  place  association  in  liquidation  .      .........    lis 

Ownership,  bank  governed  Dy  register  of       61 

Organization  certificate,  to  state  capital  and  niunber  ol 5 

Par  value  and  denomination 24 

Payment  to  begin  business 27 

Personal  property 24,  105 

Preference  in  allotment  of.  In  succeeding  association 179 

Purchaser  liable,  if  bought  for  infant • 56 

Qualificatiou  of  Directors 39 

Registration,  to  avoid  liability 50 

Sale  of,  when  necessary 28,  96 

Sale,  to  give  control  ot  bank 27 

State  cannot  limit  transfer  quality 24 

State  taxation  of 105 

Subscriber,  when  passed  to 25 

Tax,  illegal        114 

Tax  in  Territories 112 

Tax  may  be  higher  than  State  bank 108 

Tax  not  greater  than  other  moneyed  capital 106 

Taxation  of,  by  State 105,  113 

Transfer,  right  of,  etc 24,  26 

Transler,  record  of,  legal  force 25,  i7 

Transfer,  to  defraud , 49,  55 

Transfer,  when  may  be  refused 26 

Trustee  holding 6C 

Value,  par,  of  each 24,  62 

Voting 87 

Shauholdsbs— Action  against  only  after  Comptroller's  decision 58 

Agentor;  to  pay,  aasets  of  insolvent  association 194 

Appointment,  quaUflcatlon  of  agent  of 192 

Appraisal,  stockholders  declining  to  extend 179 

Assessment  for  impairment  of  capital 99 

Assets  of  insolvent  association  to  be  returned  ratably 183,184 

Association  as 07 

Capital  assessment  for  impairment  of 100, 175 

Capital  enforcing  payment  of  installmenta 28 

Capital  increase  by  and  right  to  new  stock 31,32,62,199 

Capital  increase  waiving  right  to  new  stock 32 

Capital  reduction  by  and  liability  in 34,  36 

Circulation  when  discharged  from  liability 122 

Conversion  of  State  banks,  requirements 62 

Courts'  attitude  as  to  transfer  of  shares 57 

Creditors'  bill  against 173 

Deceased,  estate  liable 48 

Directors,  election  or  appointment  of,  by 6,  37,  39,  46 

Disqualification  to  vote 39 

Dividends  may  compel  directors  to  declare 93 

Estate  trustee  liable  for  assessment 60 

Extension  of  corporate  existence 177,  229 

Extension,  not  assenting  to 178,  233 

Fraudulent  transfer  or  sale  of  stock,  recourse 57 

Individual  liability  and  enforcing 47,  60,  130,  173 

Liability  as  pledgee 53 

Liability  on  illegal  dividends 93 

Liability  on  registered  stock,  when  not 50,  62 

Liability  to  all  creditors  alike 56 

Lien  on  stock,  bank  cannot  acquire 96 

Limitati(m  statute  of  liability 68 

Liquidation,  failed  association 192 

Liquidation,  voluntary 118,  226 

List  of,  subject  to  Inspection 102 

List  of,  to  be  kept  and  copy  sent  to  Comptroller 102 

Married  women,  liability  as 49 

Meetings,  rights  at 37,  38 

Names,  residences,  etc.,  in  organization  certificate 6 

Pledged  stock  sold  by  bank 96 

Pri-ferenreto  stock  in  exteiif'.ing 178 


345 

LDKBfl— Procedure  against  for  Inaolvenoy W 

Provlflions  for  election  by iS 

Proxies,  voting  by,  and  form     17,  974 

Qualiflcations  of  directors i'J 

Rights  and  liabilities  of 24,47,48 

Security  for  assets  of  insolvent  bank 174 

Set  ofT,  right  of 58 

Suit  against  directors • 132,  137 

Taxation  by  State 105,113 

Title  and  location  of  association,  change  by 184,185 

Transfer,  right  of 26 

Trustee  holding  not  personally  liable r,Q 

Vote  of,  neoeuary  to  place  asaociatlon  In  liquidation 118 

Voting 87 

When  legally  sucli M 

SignaturbonCirculation— President,  or  Vice-President,  and  Cashier 72,  75 

Treasurer  and  Register,  United  States 71,  72 

Silver— Issue,  In  exchange  for  fractional  currency 170 

Issue  of,  by  Treasury 281 ,  282 

Lawful  money 77 

Silver  Certificates— Clearing-house  balances,  payable  In 182 

Issue  and  redemption  ot^ 281,  282 

Reserve  of  National  banks,  may  be 182 

Solicitor  OP  THE  Treasury— Conduct  of  suits,  under  direction  and  supervision  of  .  ...   163 
Special  Commission — (See  Examltier). 
Special  Deposits — (See  Deposits). 

Specie  Paymhntb — Resumption  of 171 

Specific  Performance— AJ?reement  to  sell  shares  to  secure  control  of  bank 27 

Stakeholder- Association  may  act  as 8 

State  Banks— Tax  on  circulation  and  returns  required 143,  172,  173 

State  Banks,  Gonvbrtbd— Branches  of  converted 65 

Conversion  to  National,  procedure 30,  62,  143,  211-215 

Corporate  relation  to  old  bank 63 

Directors  continue  In  conversion  to  National  bank 215 

Directors  stock 39 

Enabling  Acts 63 

Liability  for  old  bank 9 

Loans  in  excess  of  limit 95 

Return  of  taxable  circulation 143,  144 

Shares  of  converted 24,  62,  143 

Shareholders'  consent  to  convert 212 

Shareholders'  personal  liability,  exceptions 47 

Tax  on  converted 144 

State  Courts — (See  also  Comptroller ;  Suits). 

Embezzlement  of  officers  of  association 147,151,154 

Jurisdiction  of,  in  what  cases 90,  91,  16i>,  161 

Limitation  in  order  and  attachment 160, 161 

State  Taxation— /See  Tax'. 

Stock*  and  Bonds — As  security 10 

Association  not  dealing  In 9 

SiTBscRiBER  TO  Stock -Capital  iuciease 33,  62 

Liability 47,  28 

Mutual  contract  to  pay  for 29 

Of  fraudulent  representation 57 

Rescinding  subscription 57 

Status,  if  receiver  appointed 62,  57 

Subscribing  to  distribute 29,  205 

When  increase  of  capital  voted,  not  made 33 

Subscription  Paper— Importance  of.  In  organizing,  form  and  instructions 195,  196 

Subscribed  Stock— When  to  be  paid  and  when  forfeited 27,  28 

Succession — Period  of  associations 8 

Extension  of  period 177 

Suits— Against  receiver,  when  and  how  brought 130,  131 

Ai;ainst  shareholders,  may  be  In  law  or  equity 68 

Certified  copy  of  organization  certificate,  evidence  In 163 

Cltlaens  of  State,  associations  are 187 

Conduct  of,  when  U.  S.  officers  or  agents,  parties 160 

Cornorate  powers  of  associations 6 

Creaitors'  bill  against  shareholders 173 

Crimes,  jurisdiction,  etc 146 

Enjoining  Comptroller  or  Receiver 135, 163 

For  Illegal  certlfving  checks 188 

For  Illegal  tax  ." 114 

For  loan  cannot  recover  Illegal  Interest 86 

Forfeiture  of  charter 136 

Illegal  preference  of  creditors 138 

Indian  Territory,  in 190 

Jurisdiction  of  Circuit  Courts IM 


346 


PACB 


SiHTS— Jurisdiction,  general,  Of  National  bank  cases 178,180,187,188 

Limitation,  in M 

Sealed  certificate  of  Comptroller,  competent  evidence 163 

Solicitor  of  the  Treasury,  supervision  in 168 

Shareholders'  agent 192 

Shareholders'  liability  to  enforce 126, 180, 178 

Surety  Bonds— (See  Bonds,  Official). 

Surplus— Converted  State  bank  with  capital  of  55,0u0,000 47 

Creation  of •      92 

Importance  of 226 

Receiver  may  be  appointed  for  deficiency 47 

Special 8* 

T 

Tax— Assessment  only  on  shareholders 106 

Capital  invested  in  U.  S.  bonds 109 

Circulating  notes  unauthorized 143, 144 

Circulation  and  enforcing  payment  of 103, 104 

Circulation  when  exempt  from   . 143 

Circulation,  rate  and  time  of  payment 103 

Circulation,  refunding  excess 104,  105 

Circulation,  semi-annual  return  of 104 

Concerning  exemption  to  other  corporations 109-112 

Difference  in  corporation  taxation 108 

Exemption  in  State  assessment 109-111 

Governed  by  State  constitution 112 

May  be  higher  than  on  certain  State  corporations 105-109-112 

Money  of  all  kinds,  subject  to,  by  States,  etc 145 

National  bank  act,  limitation  of,  in  State  tax 106 

National  bank  shares  taxable  in  Territories 112 

Not  on  capital  stock  as  personal  property  of  bank 106 

Not  to  be  at  greater  rate  than  other  moneyed  capital 108 

Pleading  must  be  specific • • •„  J^* 

Property,  personal,  of  association,  in  hands  of  receiver  not  taxable 112-114 

Provisions  restricted 145 

Recourse  for  illegal -■    ^IJ 

Regulations  of  collection  semi-annual 103, 104,  279,  280 

Remission  of,  on  insolvent  National  banks 176 

Shares  and  capital  stock,  difference 106 

State  cannot  Impose  license  tax 113 

State  may  tax  circulating  notes ■  ....    113 

State  taxation  of  National  bank  shares 1"6 

State  valuation  of  shares 108 

United  States  notea  taxable i9l 

Tbllbr— (See  also  Officers). 

Embezzlement  by 147,  148 

Territorial  CouRT-(See  Comptroller,  Redemption,  State,  etc.). 

Territorial  Law— Concerning  banking 190 

Title- Comptroller  reserve  for  applicant 197 

Form  of J97 

Association,  change  of  and  how  to  proceed 186 

Transfers— (See  also  Treasurer  U.'  S. ;  Bonds,  U.  8 ) 

Assets  of  failed  bank  when  transferee  ignorant 188 

Bonds  extended  association  not  necessary 232 

Of  assets  of  banks  after  Insolvency  void 138,139 

Of  bonds 67,  68 

Transferof  Sharks— (See  also  Shares). 

Assets  of  agent  of  shareholders •    .   ■    192 

How  made  and  rights  of  shareholders 25 

State  laws  on  trustee  holdings • 24 

State  laws  no  control 24 

Register  to  avoid  liability 50,  56 

Registry,  importance  of 50-62 

Transmission— Circulating  notes  to  U.  S.  Treasurer ;  ■   •  /, W. 

To  U.  S.  Treasurer,  U.  8.  coin  and  notes  for  redemption 284 

Treasury  Drafts— Endorsement  of • ^^o  ?2f 

Treasurer,  United  States— Association,  failure  to  redeem  notes 123-125 

Association  liquidating 121 

Certifying  destruction  of  circulating  notes 76 

Circulation,  withdrawal  of,  provisions  for 181 

Deposit  of  United  States  bonds  with,  to  secure  circulation  .  66,  68 

Disposition  of  redemption  account 190 

Enforcing  tax  on  circulation K'4 

Examination  of  bonds  and  records,  provisions  for 69 

Interest  on  bonds  to  be  retained  by,  when 100,  103, 104 

Public  moneys  may  be  deposited  with 237 

ProcpeiHnpp  in  deiatilt,  making  rpfurns  on  circulation  ...    104 


347 

PAGB 

Treasurer,  United  States— Redemplion  fund  to  be  kept  with 166,  166 

Redemption  of  circulation  by IfrJ 

Semi-annual,  return  to,  of  circulation  subject  to  duty  .  .  .  .   lo4 

Signature  of,  on  circulation 71 

Tax,  excess,  refunding 104 

Tax  on  circulation  to  be  paia  'o 103 

Treasury,  United  States— (See  also  Treasurer,  United  Slates). 

Associations  to  reimburse,  for  cost  of  redemption  of  circula- 
tion and  plates 166,  1C7,  311 

Currency  bureau  in 1 

Notice  to  present  circulation  at 124 

Penalty  for  failure  of  associations  to  report  to  be  paid  Into  103, 104 

Redemption  a(!Count,  disposition  of 190 

Redemption  of  circulation  at 125, 126 

Trust— Purchase  of  property  by  receiver  to  protect 188 

Trust  Companies— In  District  of  Columbia  must  make  reports 175 

Trustee— Evidence  of  owenership 61 

Representative  holding  stock 60 

Voting  to  extend  charter 232 

V 

Ultra  Vires— Contracts  of  association 18 

Uncurrbnt  Notes — Issue  of,  prohibited 100 

United  States  Courts— (See  Jurisdiction,  Officers  of  U.  8.,  Crimes,  etc.). 
United  States  Bonds— (See  Bonds,  U.  8.). 

United  States  Coin — Issue,  transportation  and  redemption 281-284 

United  States  Depositaries— (See  Government  Depositaries). 

United  States  Disbursing  Officers- Deposit  with  National  bank  depositaries  ....  236-239 

Fraudulent  notes  to  be  marked  by 176 

Penalty  for  unauthorized  deposit  of  public  money    238 

Withdrawal  of  public  money  and  deposits 237 

United  States  Obligations— (See  Obligations  of  U.  S.). 

Undivided  Profits — Defined 99 

United  States  Notes— Association  retiring  circulation,  depositing 167 

Circulation  of  banks  to  be  redeemed  in 83,  123,  166 

Currency  not  to  be  expanded  by 81 

Deposit  by  liquidating  bank 121 

Failed  bank,  circulation  redeemed  with 126 

Fraudulent  to  be  marked 175 

Issue  of  note  certificates  on  deposit  of 81 

Minimum  to  remain  outstanding 168 

Not  subject  to  State,  municipal  or  local  tax 146 

Obligations  of  the  United  States  defined 165 

Penalty  for  dealing  in  counterfeit 167 

Penalty  for  illegal  use  of  material  for  printing 166 

Penalty  for  passing  counterfeit 166 

Penalty  for  pledging,  etc 146 

Penalty  for  having  unauthorized  Impression  of  tools,  etc 167 

Taxable  as  money 191 

United  States  Treasurer  (See  Treasurer  U.  S  ). 

Usury — Action  to  recover  for 86 

Constructlon|of  statute  .      91,92 

Contract,  eflfect  on 90 

Interest,  vrhen  not 83 

Interest  after  maturity 87 

Penalty  and  statute  of  limitation 88,  89 

Provisions  in  regard  to 85,  86,  92 

Remedy  when  action  by  the  bank 86 

Rule  deminia 92 

State  court  jurisdiction 91 

What  necessary  to  bring  action 88,  89 


Vacancies — Board  of  Directors 41,42,45 

Verification— Reports  to  Comjjtroller 176 

Vice-President— ^ee  also  Officers). 

Bonds,  United  States,  may  sign  transfer  of 67 

Circulation,  may  sign 71,  72,  76 

Election  or  appointment  of 6 

Proxy,  not  to  act  as     37 

Violation  OF  Pkovisions  of  National  Bank  Act— Forfeiture  of  charter  for 136 

VisiTORiAL  Powers — Associations,  subject  to  what ...  116 

Voluntary  Liquidation— (See  Liijuidation,  Voluntary). 

Voters— QuallBcationa  of  shareholders  at  elections 87 


348 


W 

PAQB 

Withdrawal— Bonds,  general  provisions  respecting 67-70, 167, 181 

Bonds,  form  of  board  resolution 273 

Circulation,  associations  extending 179 

Circulation,  provisions  for 70, 122,  167, 181 

Deposit  and,  of  public  money 61,  236 

Dissenting  shareholders  in  extension • 178 

Expired  associations,  bonds  of 178 

Illegal  preference  of  creditors 138 

Liquidating  associations,  bonds  of 122 

Of  capital,  when  prohibited       98,  99 

Reduction  of  capital 34 

Unearned  dividends 98 

Women— (See  Married  Women). 

War  Revenue  Law— Extracts  from • 800-302 

Willful  Misapplication— Defined 147 


To  Bankers 

We  invite  correspondence  with  bankers 
having  interests  in  Washington,  requiring 
attention,  especially  any  who  contemplate 
entering  the  National  Banking  System.  We 
make  no  charge  for  furnishing  information 
on  the  subject,  or  for  examining  and  filing 
organization  papers  with   the   Comptroller. 

For  over  thirty  years  we  have  acted  as 
agents  and  attorneys  for  National  Banks 
before  the  Treasury  Department,  under  the 
provisions  of  the  Bank  Act;  examining  and 
counting  the  worn  and  mutilated  currency 
redeemed  at  the  Treasury  for  the  banks  we 
represent,  witnessing  and  certifying  to  its 
destruction;  also  examining  and  certifying 
as  to  the  United  States  bonds  of  the  banks 
on  deposit  with  the  Treasurer  of  the  United 
States. 

We  deposit  lawful  money  to  retire  out- 
standing circulation  of  National  Banks 
wishing  to  reduce  circulation  or  to  go  into 
voluntary  liquidation,  and  also  withdraw 
and  sell  bonds  held  as  security  therefor. 

We  are  in  position  to  buy  and  sell  Gov- 
ernment bonds  at  best  market  rates,  and 
have  also  every  facility  for  the  collection 
of  claims  in  all  of  the  Departments  of  the 
Government. 

A.  S.  PRATT  &  SONS 


WASHINGTON,  D.  C. 


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UNIVERSITY  OF  CALIFORNIA  LIBRARY 

Los  Angeles 

This  book  is  DUE  on  the  last  date  stamped  below. 


Form  L!)-100m-9,'52(A3105)444 


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AA    000  552  982    i 


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